- Business valuation for Partnership disputes
- Business valuation for The Family court, Divorce settlements, Deceased Estates ETC
- Business valuation for Selling a business.
- Business valuation for Buying a business.
- Business valuation for Shareholders.
- Business valuation for insurance purposes.
- Business valuation for stamp duty.
- Business valuation for capital gains tax. (Tax reporting/ Stamp Duty purposes).
- Business valuation for litigation.
- Business valuation for Piece of mind.
- Business valuation of Vehicles, plant and equipment belonging to the Business.
What is the Value your Business?
It is as if the value of a business is the worlds biggest kept secret.
Business owners can spend all their business life (in many cases decades) and not really know the real value of their business. By real value I don’t mean book value, but how much would somebody pay to own it.
Often the owner has a overly optimistic value of what the business could sell for due to anecdotal and inaccurate information they have heard from colleges and acquaintances, mostly not first hand but from somebody who has heard of someone who has sold a business. It may be more rumour then the real information.
Another way that business owners guess the value of their business is by looking for businesses advertised in daily papers and on the Internet, searching for a business that is similar in size and in the same industry and then comparing those businesses with their own.
There are two reasons why this method will not give you a good indication of your business value.
- The first is there are no two businesses alike. They all rely differently on their owners, have different customers and different risks associated with them, so you’re not comparing apples with apples.
- The second reason is that businesses often sell for a price quite different for the one they are being advertised for or don’t sell at all.
So, how do you then gauge how much your business is worth at any given time of its life?
Like this, first detach yourself emotionally from the business then ask yourself the following question: ”Knowing what I know now, about my business, it’s profits, advantages and disadvantages, all its benefits and drawbacks, comparing it to other businesses and investment opportunities that I could invest my money in, how much would I pay for it” (yes what returns would I want or expect for this investment?)
If you answer this question without emotional attachment and honestly, you will find the answer to the biggest mystery for any business owner… the answer to real value of your business.
Buying an established business… Points to consider when assessing a Business?
If you plan to buy an existing business, carefully analyse both the advantages and disadvantages. One advantage is that a good business history can increase the likelihood of a successful operation and ensure that finance is easier to obtain. Potential disadvantages can be overestimating the goodwill figure and a poor public image inherited from the previous owner.
As a prospective business owner you should determine the current worth of the business and its future prospects. Some important considerations are:
- Vendor – reason for sale of business, ( very important) Eg Retirement, Change of Direction, Family wants to have more time together or whatever!!!
- Establish if you are selling the Assets only of the Business or the Business as a Whole.
- Sales – patterns / trends, customer base, current suppliers ETC
- Costs – fixed and variable costs, staff costs
- Profits – analyse financial records, future cash flow and profitability
- Assets – identify and check all assets, including : Vehicles, plant and equipment, intellectual property and leasing arrangements / documentation… The age of the inventory / service History / obsolescence very important.
- Liabilities – outstanding debts, refunds and warranties.
- Purchase agreement – review carefully Making sure the I’s are Dotted and The T’s are Crossed!!!
- Restraint of Trade.
- Tax – GST, Capital Gains Tax, stamp duty implications
- Legal issues – leases, business structure. ETC
- Carry out a SWOT Analysis
- Talk to your business advisers, Accountants, Solicitors, Bankers, Business broker. get their opinion before you go to the market, or purchase, all must be on the same page!!!
A Purchaser will want to know: All The above, as well as:
- With or without Staff?
- Long service leave?
- Make sure the business is well accepted in the community.
- Check all Vehicles, plant and equipment are in good working order.
- Check if all assets are free and unencumbered.
- Check if the real estate is / or will it be available for Sale.( now or later?)
- list of all competitors
- Is the Vendor prepared to stay for a period of time for “the handover”?
- There is no substitute for properly prepared Documentation.!!!
- others TOO!!!
© Copyright L.M.P.A. Business Services
L.M.P.A. BUSINESS SERVICES
(L.M.P.A. ESTABLISHED 1971)
(Licensed Business & Marine Brokers, Real Estate Agents & Auctioneers)
“The Retreat”, 105 Pheasant Drive, McMinns Lagoon.
P O Box 38421 WINNELLIE DARWIN NT 0821
Phone:…08 89844011 Fax:… (08) 89844954
International: + 61 8 8984 4011
Phone After Hours:…(08) 89881483
Please note our Internet Home Page: www.LMPA.com.au
And our Email address: LMPA@LMPA.com.au