What is your business really worth?

Business valuation and appraisal is a specialist service providing an independent assessment of your business and its potential. Typically, clients utilise this service for:

• Sale of business and succession;
• Assessing a business opportunity or merger;
• Strategic planning;
• Capital raising and other financial requirements;
• Where there has been a death or family law dispute;
• Tax requirements (to validate tax planning strategies – see Don’t let the tax man be your valuer) ; and
• Shareholder disputes.

What does a business valuation do?

A valuation provides an independent opinion and provides a basis to confirm the value of your business. What is being valued also varies from business to business and the needs of the client. For example, it might be the whole business, only the business assets, a minority or controlling interest, or intangibles.

A valuation may also help identify areas where value could be enhanced over time. For example, if your business has a pattern of low profitability and under-performance in its sector, you can focus on establishing a pattern of profitability over a few years to enhance the value of your business (see Strategic & business planning).

A business valuation is more than an assessment of the financial statements of the business. We explore factors such as the history of the business, the business model, business sector prospects, an analysis of key revenue and profit streams, current and forward period budgets, the organisation and its people structure, competitor and sensitivity analysis, limitations, and material events and transactions. This will mean visiting the business, compiling key documentation and talking to you to clarify key issues and events.

The resulting valuation report documents our valuation opinion, the purpose and scope of the valuation, what has been valued, the assumptions we have made to arrive at our valuation opinion, and any necessary disclaimers on the valuation opinion.

Business valuations are often used in court proceedings where there is a dispute or where the court needs to place a value on the business to reach a settlement between parties.

What is a business appraisal?

A business appraisal is different from a valuation, providing management information beyond the likely value of the business. It looks at the business as an operating unit and reviews its operational sustainability.

An appraisal considers the valuation issue, not so much from a perspective of establishing a value for the business, but rather as a commentary on the business relative to the value that has been set for it. Depending on your industry and the size of your business, the value of your business may already be reasonably predictable.

An appraisal is often used as a management tool and during the sale of a business to enhance negotiations.

The appraisal report provides a comprehensive review of the business, the scope of the appraisal, identifies what documents or third party advice we have relied on, and any limitations in the report and its use.

For further information contact:

Greg Hayes, Director, Hayes Knight NSW