A business valuation is one of the most important services available for anyone who owns a company. The service refers to a careful analysis of the organisation performed by qualified professionals to determine its true worth.
Part of running a business is staying on top of everything. This means knowing the value of your company in the existing market conditions. Business valuation services in Perth provide owners with a reliable method of finding out an organisation’s precise value.
A business valuation report can stay valid for up to a year after the date of assessment. The reports are legally-recognised and serve as conclusive proof of the value of the organisation. Each one is crafted in line with regulatory and legislative requirements and custom-made to suit the purpose of the report.
As these valuation reports are seen as official documents, owners or investors need not worry about potential debates or disagreements regarding the value found.
What is a valuer?
A certified business valuer is a qualified professional who has been trained in assessing all sorts of organisations. These experts are members of professional accounting bodies such as CPA Australia, Chartered Accountants Australia and New Zealand and the Institute of Public Accountants.
Valuers follow the rigorous requirements of professional and ethical standards set out by the Accounting Professional & Ethical Standards Board (APESB) when preparing valuation reports.
Fundamental principles such as integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour are mandatory for business valuers.
A professional business valuer is skilled in preparing comprehensive valuation reports for all sorts of start-up companies, SMEs, and larger corporations. As specialised experts, they have the skills to not only assess the worth of a business but to uniquely interpret the company’s performance and industry standing.
Valuers are forensic experts with qualifications in management and commercial accounting. Each one is well-versed in custom-making reports to suit a client’s needs while meeting all of the relevant regulatory requirements.
Business valuation process steps
There are several different types of business valuation methods that professionals follow. A primary method is chosen, and secondary ones are used for refining the figure. The three most commonly applied business valuation techniques are:
Capitalisation of future maintainable earnings
The approach focuses on the historical financial statements of the business to predict future earnings. Valuers look at industry multiples and ATO benchmarks to measure the performance in the local economic market.
Professionals apply a normalisation method to discount once-off expenses and create a fair report on the organisation’s worth. It is one of the most commonly used methods for determining a company’s value.
Discount cash flow method
An approach that uses forecasted cash flow statements to determine the business’s value in the existing market. It is reserved for larger entities that can predict future cash flow to track investment opportunities.
Valuers weigh the forecasted cash flow statements against anticipated economic risks to reach a reliable figure.
Net assets approach
This method is firmly focused on determining the value of the business’s assets. Valuers review both the tangible and intangible assets and assign a monetary worth to each component.
The sum total of all of the assets is weighed against the financial liabilities of the business. This approach is usually reserved for companies that are unlikely to turn a profit.
How do I get a business valuation?
To get a business valuation, you’ll need to reach out to a reputable organisation. Finding a reliable valuation firm offering the service you need can seem like an intimidating task, but there are a few things you can do to ensure you’re choosing the right one.
A few questions you can ask yourself when choosing a valuation firm are:
Do they offer the right service?
Think about why you need a valuation. If the valuation firm doesn’t offer the service you require, there’s no point in considering them. Giving a firm a call and asking about their offerings can help you get some clarity.
Are they qualified?
It’s important to make sure that you’re purchasing a service from registered valuers who have the needed qualifications to perform business valuations. Valuers should be experienced management or commercial accountants who are authorised to perform certified business valuations.
What are old clients saying?
Checking reviews, testimonials, case studies, and google ratings can help you get an idea of the type of service you might be about to get. If you notice several negative reviews, it may be best to look elsewhere.
What is the cost?
Costs will vary from firm to firm, and you may want to request a quote to see if the service falls within your budget. The price of a valuation tends to be higher for larger corporations with more complex business models.
Summary
A business valuation refers to a careful analysis of an organisation to determine its market value in the existing market conditions.
These professionals are experienced management and commercial accountants qualified to prepare certified business valuation reports. Valuers use a combination of reliable methods to reach precise final figures.
When choosing a business valuation firm to assist, make sure they offer the right services, have the right qualifications, and fall within the restraints of your budget.
For more information on independent business valuation services, speak to one of our qualified professionals today. We’re more than happy to answer all of your questions.