Business Valuations Sunshine Coast & North Lakes

Business Valuations for Sunshine Coast businesses can be useful to determine a selling price, used for finance, estate planning and more. Additionally, it also helps businesses set a benchmark for growth.

Business valuations can be difficult to calculate because there are several methods and combinations that can be used to determine an accurate market value. However, you need to know when and how to use each method and how to accurately calculate each of the values for all assets and liabilities.

Please visit our pages for business valuations in Brisbane, Redcliffe and North Lakes.

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What is a Business Valuation?

A Business Valuation uses different methodologies to estimate the total dollar value of a business or an owner’s share in a business. A business valuation takes into account tangible and intangible assets, cash flow and other indicators to determine a business’s market value. The amount or range provided from the valuation should be accurate, accounting for current market conditions.

Now whilst your home/property might be valued by a real estate agent, a business should be valued by an experienced business accountant. They keep up with current market trends and specialise in using legal accounting methods to value your business based on financial reports and other resources.

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What are Business Valuation Methods?

Valuation Methods are legal accounting methods used to value a business. According to the ATO Valuation Methods, the different methods are designed to account for market, income and asset indicators. Hence a combination of methods may be used to get a more accurate value of the business.

Business valuation methods include:

  • comparable transactions
  • comparable trading
  • capitalisation of earnings
  • discounted cash flow
  • calculation of net assets on a going-concern basis.

What Business Valuation Methods do I use?

The mechanics of business valuation for each method are different and when you decide which method or combination of methods you need to use, you will need to explain why you chose that method. When disclosing a business valuation for tax purposes, you will also need to disclose:

  • why you chose that valuation method and why it was appropriate
  • how you determined different values in your calculation
  • the date and purpose of the valuation
  • a summary of the corporate structure and management of the business
  • information about key clients/customers and competitors as well as other market information
  • information about operations, revenue streams, products and services
  • financial structure, sales and marketing strategy information.

There is a lot to take into account when determining the right business valuation method or combination of methods. That is why it is important to get in touch with professional business accountants to assist in getting you the most reliable valuation.

Why hire a business accountant for a valuation?

Business Valuations can be extremely complex. Especially if you do not know the rules and standards. When submitting a business valuation to the ATO (for tax purposes), you need to ensure that you are using the right method or combination of methods. Additionally, you will need to disclose why you chose a particular method or combination of methods.

Unfortunately, time is something you never get back and becoming an expert on business valuations takes years of practice. Hence, it is important to ensure that you seek the assistance of a business accountant to accurately complete a valuation for your business to save you time and money.

Why choose Total Business Partners?

We have up-to-date knowledge of accounting and taxation standards and will clearly explain things to you, to ensure that you get the most accurate business valuation.

Our services don’t just stop at taxation and business valuations. We have a whole suite of accounting and financial services available to individuals and businesses of all sizes. We’ll take the time to speak with you, ensuring we understand all your needs.

Business Valuations FAQs

How do I calculate the value of my business?

There are several different business valuation methods that can be used to determine the value of your business. However, it is important to understand which method or combination of methods is most applicable to your business in order to achieve the most accurate valuation.

For your own peace of mind, a simple method that can be used involves subtracting your liabilities from your assets. However, it can be difficult to calculate the value of intangible assets as well as take into account different market factors. Therefore, it is important to seek the help of a professional business accountant to complete a thorough business valuation for you.

How is a business valuation done?

A business valuation considers the market, income and asset-based factors using different valuation methods. When you use particular methods, the ATO requires justification for the use of the method(s) and how you determined the values of certain assets or liabilities in your calculation.

A specialised business accountant will also be able to analyse different aspects of the business to get a more accurate valuation including management, capital structure, future earnings and market value of the assets.

What is the times-revenue method?

The times-revenue method is a general rule that can be used for small businesses that want to estimate the value of their business. The times-revenue method provides a range by multiplying the yearly revenue of a business by 0.5 and 2. For instance, if your business produced $500,000 in revenue, the estimated value of the business is between $250,000 and $1,000,000.

This is a very large range and does not take into account a lot of factors. As a result, a specialised business accountant will be able to give you a far more accurate valuation using different valuation methods.

What are the 5 methods of a business valuation?

There are 5 key pillars of business valuation. These are:

  • Asset valuation
  • Relative business value
  • Historical earnings
  • Discount cash flow evaluation
  • Maintainable future earnings

Asset valuation is the calculation of all of your assets such as cash, equipment, inventory, stocks, patents, real estate and more. Historical earnings take a look at the history of your business in areas such as debt payments, gross income and capitalisation of cash flow. How well it does in these areas will increase or decrease your business value.

Relative valuation essentially compares your business with similar businesses to see how much they were sold for or valued at. Discount cash flow evaluations take your business’ future net cash flow and give them a discount to values of the present day. This allows you to see how much you may make from the business assets in the future. Lastly, maintainable future earnings values the profitability of your business in the future by looking at previous years and projecting a forecast.

What is a pre-money valuation?

Pre-money valuations are essentially the overall value given to a company before any capital investments. This initial valuation is typically calculated by evaluating the business’ assets, revenue, liabilities, profits and other factors. It will also be important to examine the company business plan and market strategy along with competitors, the relevant market and external economic factors

Pre-money assessments are based on the company’s value before any fundraising has occurred.

What is a post-money valuation?

Post-money valuations are conducted after a business has experienced an investment in capital, typically through fundraising. Within any post-money offer for a business by an investor, there is an implied pre-money valuation amount within it.

The share price of the company is a simple division of the pre-money valuation and the number of outstanding shares. When the new investor does invest capital, new shares must be issued. This will increase the number of overall shares and dilute the original shareholder portions.

Sunshine Coast Business Valuations location

North Lakes Business Valuations location

Take a look at some of the other services that we provide in Sunshine Coast to facilitate success

At Total Business Partners, we are driven by the success of our clients. We are Xero certified accountants, well-versed in structural business planning and financial management, and always look to provide the best standard of service. With this in mind, we have chosen to offer the following comprehensive services to help Sunshine Coast businesses thrive. We also provide services to the wider Brisbane region, including North Lakes.

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