Blog

As an owner, a business valuation is vital to the strength of your business to assess if your business is moving forward or not and knowing its true value is key to planning a positive future for your business but also for you personally.

It is important to have an official comparison between the price you paid for your business and the current value of it.  Once you have your valuation, you can then work on a profit improvement plan.

7 Reasons Why You Need A Business Valuation

• You are looking at bringing on a new business partner; Value the business properly to avoid future conflict (the same applies if an existing business partner exits the business)
• You need to insure your business for what it is really worth – surely you don’t want to overpay on insurance!
• You are divorcing and need to know how much your assets are worth, thus how much each partner should get from the business
• You need to assess if you are going forward or not; Compare the price you paid for your business and the current value of it today
• You need to prepare an exit plan and make sure that you can retire or move on with sufficient resources; Find out how much work actually needs to be completed before you reach your goal/desired sell price
• You don’t want to sell your business for less than it is really worth
• You are just curious after all!

How you benefit from having an expert Advisor complete your Business Valuation

You could do the valuation yourself, but there are several important reasons why this might not be the best approach:

1. Valuation Methodology Complexity: There are numerous valuation methodologies, each suited to different business types, industries, and circumstances. Unfortunately, without expert knowledge, you may not know which method is most appropriate for your business. This can lead to an inaccurate or incomplete valuation that doesn’t truly reflect your company’s worth.
2. Lack of Expertise: Unless you are a financial analyst or business valuer, it can be difficult to navigate the proper calculation steps involved in a business valuation. Business valuation requires specialized skills and experience to interpret financial data and apply the right methods to ensure accuracy.
3. Subjectivity of Personal Opinions: As a business owner, it’s easy to have a subjective view of your business’s worth. Emotional attachment or bias can cloud your judgment, leading to inflated valuations. A professional valuation is based on objective analysis and data-driven insights, removing any personal bias from the equation.
4. Legal and Compliance Issues: A self-done valuation cannot be used in court or for legal purposes, as it does not adhere to Australian Accounting Standards—specifically APES 225, which governs professional valuation practices. Without this compliance, your valuation would lack credibility in a court of law, undermining its validity in legal disputes.
5. Risk of Legal Action: If you buy, sell, or enter into agreements based on an incorrect or improperly conducted valuation, you could face legal consequences. Whether it’s a dispute with a business partner, in the event of a divorce, or during negotiations with a new buyer or former business owner, the stakes can be high. An improper valuation could lead to costly legal action if the other party discovers discrepancies.
6. Overpaying for Insurance: Without an accurate business valuation, you could end up overpaying for insurance each year. If the calculations are incorrect, you might find yourself with an insurance policy that doesn’t align with the true value of your business assets, leading to unnecessary expenses.

If you’re looking for a professional, reliable valuation, we are experts in Business Valuation and can provide you with an APES 225-compliant valuation. We offer these services at a pre-agreed, fixed cost, ensuring transparency and accuracy in the process. Contact us today to find out how we can assist you in obtaining a valuation that meets legal standards and accurately reflects your business’s worth.

 

Adrien Giraud
Director – Business Improvement
P: +618 6315 2755
E: enquiries@wabusinessvaluations.com.au

GET IN TOUCH

---

_{The material and contents provided in this publication are informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained.}

_{Liability Limited by a scheme approved under Professional Standards Legislation}