What is a business valuation?
Business valuations in Adelaide are designed to calculate the market worth of a company. Having a comprehensive view of your enterprise’s value is key for entrepreneurs, investors, and business owners of every kind. Licensed valuers are trained to analyse a business by its revenue, expenses, liabilities, assets and more.
In the Australian business world, these kinds of valuations are vital for:
- sales
- mergers
- acquisitions.
Beyond the above, any form of major business transaction may call on an independent valuation.
It’s an exhaustive process that relies on far-reaching expertise. Valuers review market position, the potential for growth, financial performance and other key factors.
A business valuation can assist in identifying future economic and growth opportunities, therefore driving informed decision-making. Successfully maintaining an enterprise over the years means holding on to its value in the greater market.
These kinds of appraisals are critical across the Australian business ecosystem. They apply to large corporations, franchises, small businesses and even startups. No matter the size of your enterprise or the industry you’re operating in, valuations can boost both growth and profitability in the long run.
Valuers hold diverse qualifications and experience that allow them to review organisations in every sector. Their methods are well-proven and designed to ensure accuracy and transparency.
The difference between business and property valuation
Business valuation is a distinctive process not to be confused with independent property valuations. They may call on similar techniques and disciplines but generally serve different purposes.
For clarity, business valuations calculate the market value of a company, while property valuations cover the value of real estate. That could be retail, industrial or residential property, among others.
Key differences between the two include:
- reasons for the valuation
- factors they consider
- timing.
An organisation may seek out a valuation for the likes of estate planning, business loans or mergers and acquisitions. Property owners or potential buyers use valuations in the case of mortgage refinancing, calculating property tax, negotiating rental agreements and buying or selling.
The steps of business valuations include deep market research and analysis, a thorough review of the business’ assets and a discounted cash flow analysis.
On the other hand, property valuers use the sales comparison, income and cost methods.
Qualified business valuers look at factors such as industry competition, market trends and financial performance. Property valuers look at the location, as well as the size, condition and quality of the physical property.
Finally, a valuation can be sought out at any time for a multitude of reasons, whereas real estate is generally valued at the point a property is sold, refinanced or taxed.
How qualified is a business valuer?
Becoming a business valuer is even more involved, complex and demanding than the road to qualifying as a real estate valuer. Every business valuer requires intensive education, training, and experience in order to work as an independent business valuer.
This is why business owners choose qualified experts.
Holding a relevant qualification is the first step in becoming a valuer. This could be a Master of Business Administration (MBA) or a Master of Commerce (MCom), for instance. Anything directly related to economics, accounting or finance.
Furthermore, they are required to hold professional certifications such as:
- Chartered Accountant (CA)
- Certified Practicing Accountant (CPA)
- Accredited Business Valuer (ABV).
The next step is to garner official, formal training in business valuation.
This allows a budding valuer to form a strong foundation of expertise across multiple industries and cement the various methods of valuation they will use throughout their careers. Most valuers will take on the various courses and training programs developed and offered by the Australian Valuation Standards Board (AVSB).
Most business valuers will first gain relevant experience by working in accounting or finance.
Much of the business valuation discipline means keeping up with numerous, rapidly changing industries. The best way to do this is to establish broad networks of professional contacts, as well as maintain knowledge of changing regulations and industry practices.
Why companies need valuations
Managing your organisation’s value is essential to long-term success.
A key benefit of a valuation is analysing and making informed decisions on company operations. This can drive decisions on where you invest your resources, whether that be new hires, marketing or research and development.
This is also the best way to identify key areas for improvement. Based on this information, a company can effectively plan for expansion and general growth.
By extension, business valuations can help to boost a company’s value, as well as establish the perfect, market-related selling or buying price.
When companies look for financing from investors or banks, the lenders want a clear idea of the enterprise’s total value to understand the risks involved in lending. A legally certified valuation report provides the objective data lenders and investors need.
Summary:
Business valuations are a key component of the Australian economy. They stretch across every industry, from IT companies and law firms to restaurants and hospitals. From nationwide corporations to family businesses and startups. They are a proven means for any company to establish and manage its true market value.
They are distinct from real estate valuations. Business valuers rely on different qualifications, experience and techniques to accurately and objectively carry out the valuation process.
These services can help companies secure financing or investment or support the likes of mergers and acquisitions. They are a multi-use tool with which to improve your organisation’s market value, drive growth and make informed operational and financial decisions.
Reach out to our qualified valuers for a free quote on our services.