“How much is my business worth?”
This question is asked by all business owners at various times during the life of their business, but most importantly when they want to sell!
The valuation of any business or company is a challenging task. A few key activities need to take place first. These can include:
- accounts need to be professionally validated
- plant and equipment assessed
- forecasts for future years completed
- past and present relationships analysed
- consideration for any brand value established during the life of the business
Methods of appraising a business
Once we’ve gathered the necessary information, a range of proven valuation methodologies could be used. The selection of a particular valuation method isn’t always straight forward, though! Valuation methodologies can be limiting and depending on the circumstances, a mix of methods is sometimes useful.
Determining a figure
It’s common for different outcomes to be achieved depending on the method used and the purpose of the valuation – this is especially true when more than one part is engaged to determine the value of a given business. However, valuations are of little use unless they’re combined with a professional interpretation of the individual results and knowledge of the prices that can be achieved on the market. The theoretical value can differ greatly from the achievable value.
Who can tell me the value of my business?
Partnership buyouts, divorce settlements, finance requirements are several compelling reasons why a valuation should be undertaken by a qualified licensed and experienced business valuer. However, often a business appraisal completed by an experienced business consultant is sufficient to establish a sale price.
If accounts are up-to-date and reflect the current operation of the business, an appraisal is generally a cost effective and efficient way of determining how ready the business is for market and a suitable asking price.
What happens if the sale price is unrealistic?
For most business owners, selling a business is disruptive to the operation of the business while it’s for sale, and it’s common for the performance of the business to drop while it remains on the market with an unrealistic sale price.
An experienced consultant can use their knowledge of the local market to establish a realistic price, avoiding too much disruption to the business during the time it’s for sale. As Principal of Choice Business Sales and as a member of the Australian Institute of Business Brokers, I’ve developed a practical and goal-oriented perspective. My long history in South Australian business enables me to assess whether a business value is reasonable and whether the methodologies used to establish the market value make sense or not.
Consider local economic factors
South Australia has a unique economy compared to the other states in Australia. If you’re selling your business, it’s important to establish a value for your business that rewards your hard work but is also relevant to the local conditions and environment.
A note to franchisees
Franchise business can sometimes make the mistake of imposing a national performance criteria model when in fact local factors are more relevant. At Choice Business Sales Consultancy, we mesh local experience with globally recognised valuation methods. We understand the local perspective that should be applied to South Australian businesses.
Want to know what YOUR business is worth?
If you would like a no-obligation, free consultation to establish the value of your business, call John Travers at Choice Business Sales on 0439 100 309.