There are many reasons to determine the value of a business. Knowing what a business is worth is necessary when you are:

• buying a business
• selling a business
• selling a share in a business
• getting a business loan
• attracting investors
• valuing your own net worth

There are different ways to value a business – some more complex than others – and each method has its advantages and disadvantages. Valuations are usually based on a combination of methods.

There are four commonly used valuation methodologies used for a small business valuation:

• Future maintainable earnings
• Earnings multiple
• Comparable sales
• Asset Valuation

Because buyers and sellers often have different ideas about what a business is worth, it is a good idea to get a well-balanced and independent valuation. This can help speed up negotiations and offer a more complete picture of a business’s value.

To properly value a business a compilation of business information is required, including:

• Market information and industry conditions
• History of the business
• Purpose of valuation
• Employees Information
• Goodwill or other intangible assets
• Financial information – trading history (3 to 5 years)
• Fair salary for owner
• Fair return on investment

For assistance with the valuation process contact us on (03) 9736 1877.