There are several reasons that may lead to a business valuation. The most common are:
Buying or selling a business
Succession and estate planning
Death/incapacitation of business owners
Verification of net worth for investors or banks
Just wanting to know what your business is worth
Determining a fair market value will be influenced by the type of business and the reason for the valuation.
A key component will be the ability of the business to generate consistent profits, which will require an analysis of past and current earnings, as well as the sustainability of those earnings.
This will be important for a small business valuation.
The Business Valuation Process
We undertake a process that examines and analyses all of the client's operating and business fundamentals and establishes the likely value of the business.
The valuation process typically follows the following steps:
- We are contacted and obtain a basic understanding of the nature of the valuation
- The client and ourselves complete a Client Information Kit together with the required financial information [usually the last 3 years financial statements plus recent management accounts]
- We discuss the underlying parameters
- We perform the business valuation
- We provide the client with a business valuation report
The Valuation Report
The business valuation document is a comprehensive valuation report. The report layout, design and subject matter is consistent with bank approved valuation standards.
The report includes business value, capitalisation rate, description of how the valuation has been calculated and key assumptions, narrative explanation of value drivers and recommendations on how to improve business value.
It complies with the requirements of the New Zealand Institute of Chartered Accountants AES 2 Standards. Copies of the report are made available to you for your financial advisors and legal representatives.
The fees depend on the complexity of each valuation. When we receive a valuation brief from a client, we will be able to prepare a fixed fee quotation. The valuation fee increases for more complex valuations, where several business entities are involved and/or where the quality of information avaliable changes or is of poor quality.
We are committed to providing the highest quality valuation services to our clients. Upon receipt of all the relevant information we guarantee a 5 day turnaround for issuing the Report.
We can also use a business value gap calculator to determine what a business needs to be worth at time of sale and a future profit target to achieve a desired standard of living at retirement.
For more indepth information on business valuation, see our article What is Your Business Worth?
If you are interested in a business valuation, contact us for a no cost, no pressure initial consultation on (04) 5666 233.