Business Appraisal

The Value of your Business

Understanding business value in detail is one of the first conversations I have when I first meet with a new client. The value conversation is usually very broad and starts with addressing the many different perspectives on value.

There is a difference between how much profit a business makes and how much the business is worth. Some high profit businesses are not very valuable and conversely some low profit businesses are very valuable. It’s not as simple as applying a standard valuation multiple.

There is a difference between how much your business is worth to you and how much the business is worth to someone else. Typically, you will see your business (and the risk and value associated with it) quite differently to how someone else will see your business.

Individual circumstances and perspectives make a big difference. Informed business owners will understand these differences and use them to their advantage.

Truly understanding business value requires the preparation of a business appraisal or in some circumstances a full independent valuation. We can talk through the differences between an appraisal and a valuation and determine which is the best solution for your situation.

A written Business Appraisal

Preparation of a written appraisal will require full analysis of detailed information including financial statements, business plans and forecasts plus external information such as recent market transactions. There will always be a level of professional judgment required to interpret the information and to determine a suitable value range. It is important to understand the reasoning behind those professional judgements.

The conversation does not stop at the preparation of a written appraisal. Instead, we have further detailed conversations about how the owner can influence the valuation by committing to different courses of action. And this is the key point – the goal is for the owner to have an awareness of the full range of different scenarios that can lead to positive valuations for the business.

We can then discuss how you as an owner can integrate the concepts around business value into your ongoing business strategy and succession / exit plan. This maximises your chances of success.