A realistic business valuation is more than merely looking at last year's financial statement. A valuation will have a thorough analysis of several years of the business operation and an opinion about the future outlook of the industry, the economy and how the subject company will compete. The information that they should be looking for relates to all areas of the business, both financial and non-financial.
First steps should be to;
- Compile and summarise financial statements for the last 3 years, i.e. tax returns, profit and loss statements, etc.
- Identify and document positive business trends, e.g. consistent growth over the last 18 months
- Identify future potential of the business based on independent reports, e.g. industry trends and market growth
- Identify any areas where the business can be improved
- Identify any potential obstacles to sale. E.g. licensing requirements, non-transferable skills or expertise, etc.
How is a business valuation compiled?
- Look for recent value and sale prices of similar or equivalent businesses as a reference
- Identify assets associated with your business, e.g.
- property and infrastructure,
- established customer base,
- supply agreements in place,
- hand-over training, and
- future profitability of the business
- Identify any liabilities of your business, e.g.
- money owed,
- costs involved with equipment upgrades, and
- repairs or maintenance required
After the information is complied and an asking price is set you will need to;
• Prepare a prospectus or information package for prospective buyers including all relevant business details, e.g.
o will you be providing training for the new owner/s?
o be clear about what assets you will be selling with the business?
o what are the key value propositions for a prospective buyer?
The real potential worth of your business is what you are really after. Murray Nankivell can help you to assess the business value by performing an independent valuation to help you achieve the best possible outcome. This is our goal, as well as yours.
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