Preparing a business for valuation

Business Insights

A valuation determines the estimated amount for which an asset should exchange on the Valuation Date between a willing buyer and a willing seller, in an arms’ length transaction after proper marketing, wherein the parties had each acted knowledgeably, prudently, and without compulsion.

business valuationIn assessing the value of a business for Family Law purposes, we can utilise the following valuation methodologies:

  • Discounted cash flow;
  • Capitalisation of maintainable earnings;
  • Asset-based methodologies; and
  • Industry-specific methods.

To assist the valuer, it is important to have the following prepared:

  • Financial Statements and tax returns for the last three historical financial years and year to date management accounts;
  • Any budgets or forecasts prepared;
  • Analysis of competitors;
  • Copy of the lease for the business premises including any renewals and details on the size of premises;
  • Copy of any loan agreements;
  • Copy of key supplier/customer contracts;
  • Copy of constitution/trust deed/partnership agreement/shareholders agreement; and
  • Copy of any independent property valuations obtained for property, plant, or equipment.

Details of the following for the last three historical financial years and year to date management accounts:

  • business valuationAnalysis of sales by customer or nature;
  • Breakdown of remuneration paid to the owners or associates, including superannuation;
  • Details of any private expenditure included in the profit and loss statement; and
  • Explanation of fluctuations in revenue and expenses including one-off income or expenses.

HOW CAN RSM HELP?

If you have any questions regarding preparing a business valuation,  get in touch with your local RSM office.