Running a successful business means, in part, choosing the right partners. That goes for everyone from your cleaners and interns to your accountants and executive leadership. When it comes to staying on top of your organisation’s value, you’ll want to team up with a licensed valuer in Brisbane.
Whether you’re a start-up, a small family business, a chain or large-scale corporation, any critical business decisions or changes in structure should go hand-in-hand with a fresh valuation.
Licensed, independent business valuations are:
- designed to suit any type or size of business
- performed by Certified Practising Valuers (CPVs)
- based on a series of proven methods
- legally certified and admissible to the courts.
Businesses seek out valuations for everything from litigation to succession planning. Each valuation report is compliant with a host of standards and procedures established by the Federal Court Circuits, Australian Taxation Office (ATO), as well as Accounting Professional Ethical Standards.
Any qualified valuer sports a unique combination of expertise, spanning your business operations, commercial accounting and forensic reporting.
The goal of a CPV is quality, integrity, consistency and transparency. The final valuation reports objectively reflect fair market value, whether that be current or retrospective.
What is a business valuation?
Simply put, valuation is the process of establishing the market value of any kind of property. You may be more familiar with valuations conducted for the likes of residential, rural or industrial properties. However, there are a number of key reasons for a business to seek out a valuation.
It’s a process that relies heavily on your CPV’s deep property, finance and commercial knowledge. Your valuer will need to analyse the likes of your revenue, expenses and wages to understand and clearly illustrate the market worth of your organisation.
Common purposes for a new business valuation include:
- strategic, family, exit and succession planning
- family law and litigation matters
- calculating your tax obligations
- pre-purchase or pre-sale affairs.
No matter the size of your enterprise, a professional valuation can help you get a clear grasp on the state of your operations and your place in the market. Each valuation is performed according to strict ethical and quality standards. Valuers work with transparency and are trained to guide the client throughout the process, keeping them informed at all times.
At the end of the service, your final valuation report will contain in-depth descriptions of the process, as well as the methodologies used for your valuation.
Business valuation process steps
Accurately calculating either the current or retrospective market value of a business is a complex affair. Business valuations employ a rigorous combination of financial analysis, as well as market and industry research.
The process is condensed into three primary methods:
- the capitalisation of maintainable earnings method
- the net-based assets method
- the discounted cash flow method.
Which method is used is dependent on several factors. Namely the purpose of the valuation, as well as the scale, performance and overall needs of the business.
The capitalisation of maintainable earnings is the method most commonly used in business valuations. It is most appropriate when working with small-to-medium sized entities. Here, your valuer utilises various normalisation and weighting formulas to analyse historical financial statements and determine the business’ anticipated earnings.
This involves a careful review of revenue, tax and interest rates, accounting for depreciation.
The net-based assets method is reserved for struggling businesses. This includes those planning closures, lacking goodwill or unlikely to generate profit.
Your valuer will calculate the business’ value based on its tangible and intangible assets. The market value of these assets is researched and measured against financial liabilities.
Finally, the discounted cash flow method is used for companies accomplishing multi-million-dollar turnovers. In essence, it involves the use of proven industry formulas to calculate revenue against the risks of the cash flow.
Why get a business valuation?
As several case studies have proven, there are various diverse but critical reasons to pursue an independent business valuation. When making any major decision or facing key changes to the company, a valuation is most likely in order.
For instance, in the case of enacting a will. Facing legal complexities in the aftermath of a loved one’s death is something most aren’t prepared to do. At least not alone.
Perhaps ownership of the business is changing hands or shares need to be redivided. Licensed valuations are legally certified, largely due to their impartial nature. The services of a CPV present no conflict of interest and they are the ideal arbiter in these situations.
Another example would be business restructuring and its relation to the ATO. This organisation will often conduct an investigation to ensure that everything is above board. A good independent valuation service is compliant with all the requirements of the ATO and can help your business avoid being charged with unnecessary taxes or fines.
Summary
If you are or are soon to become a business owner, the time for a comprehensive valuation will arrive sooner or later. This could be buying or selling, restructuring, calculating your tax obligations and more. Either way, you’ll want to work with a firm capable of delivering legally certified business valuation reports.
Certified Practising Valuers can calculate the value of your enterprise through either the capitalisation of maintainable earnings, net-based assets or discounted cash flow method. The basic guarantee is accuracy, objectivity and transparency.
For more information on business valuation services, or to receive a free quote on your next valuation, reach out to one of our highly experienced valuers today.