How To Value a Business
A business’s value is contingent on more than its revenue. Our Brisbane Business Valuers consider a broad scope of variables such as economic stability, industry benchmarks, salaries and ownership roles to calculate a correct fair market value. Our Senior Business Valuers are experienced in valuing all business types and thus are able to apply one of the following alternative business valuation methodologies:
Capitalisation of Maintainable Earnings:
This methodology focuses on the historical financial statements of the business to calculate the anticipated earnings via normalisation and weighting formulas. Our Senior Business Valuers will analyse financial statements and apply these figures to industry based and ATO key benchmarks to calculate the true business value.
This methodology will be used to analyse areas such as revenue, tax, interest while taking into consideration any depreciation variables and normalise these figures to eliminate any inconsistent variables. Once these are taken into consideration and calculated accordingly, a weighting method will be applied to gauge the business’s future earnings. From this, an accurate value can be calculated.
Our Senior Business Valuers will use this methodology for most small to medium business’s and is considered our most commonly used methodology.
Net-Based Assets Approach:
The Net-Based Assets Approach purely focuses on calculating value from the intangible and tangible assets alone. In this case, our team will calculate the business’s value by accumulating the market value of the assets and weighting these against any financial liabilities. This approach is usually saved for business’s that will unlikely turn a profit, is in the process of closing down or has little to no good will.
The Discounted Cash Flow Methodology:
This methodology focuses on the business’s projected net cash flow forecasts. Cashflow projection is usually reserved for larger entities who have the capacity to make such calculations to track investment potential against economic and industry trend fluctuations.
Our Senior Business Valuers will rely on these future projections to calculate the business’s value back to the present current market. From here, our team will utilise industry formulas to estimated revenue against the risks of the cash flow.
While many small to medium sized enterprises won’t have access to these projections, this methodology is reserved for companies who have multi million dollar turnovers.
Our team’s knowledge and skill in regard to conducting a Business Valuation using these methodologies is incomparable. If you want to find out more about what we can do for you and your business, check out our frequently asked questions or contact the team on (07) 3067 7233.