We were recently asked to provide a valuation on a business as one of the partners was being bought out. The partners had their own opinion that the business value was in the range of $1,000,000 as a rounded figure. We performed the valuation with our expert team of advisors and accounting staff utilising the proven methods and systems we have developed over our 21 years of service. With great shock to the partners, the valuation came out in the vicinity of $330,000.
The main contributing factors to the lesser value were as follows:
- 1. Last 3 years of trading had seen a decline in sales.
- 2. Increase in trade debtors and WIP.
- 3. Eligibility of long service leave of staff.
- 4. Level of Div 7a loans creating poor, free cash flow.
The results are formulated through our process and utilisation of the Risk and Value Driver Assessment (RAVDA). This was completed by each partner and an aggregate score given which then provides a scorecard to see what areas the business is deficient in.
The partners have now asked our team to provide advice on how they can improve the value within a relatively short period of time and we have the answers.
Valuating business may be required for a number of reasons.
- 1. Sale
- 2. Retirement
- 3. Succession
- 4. Partner buy out
What do you think your business value is?
Contact our office today if you would like to access your own RAVDA free of charge.
Unlock the true value of your business TODAY ready for what tomorrow brings.
General Advice Disclaimer
General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.
Did you like this article? Email it to a friend