How to Value a Business
Calculating a business’s value is a complex and extensive process that takes into account a range of variables concerning business practice and performance against the local market. As such, the process of calculating the value of any business is largely dependent on the valuation requirements and business size.
At Darwin Business Valuations, our team are equipped to calculate the fair market value of any business using a range of alternative methodologies. These methodologies will involve examining expense variables, business operation procedures, wages, and financial statements to gain an insight into the overall business. As such, these methodologies can be utilised to provide a unique insight into any business for any valuation purpose.
Capitalisation of Future Maintainable Earnings: Our business valuers will take a look at the business’s historical financial statements and tax returns to calculate the anticipated earnings of the business. This will consider local market volatility and individual business performance through standardised industry multiples and tax benchmarks to calculate business earnings. Our business valuers will also eliminate any one-off expense variables to ensure a well-rounded, accurate representation of overall business performance.
As such, our business valuers will then be able to analyse and interpret these findings by applying a weighting formula to expertly determine future earnings which will be used to determine its current value. This is our most common methodologies used as it can be applied to most valuation requirements within small to medium enterprises.
Net Assets Approach: Our business valuers will take the list of both tangible and intangible assets and calculate the sum of these against any financial liabilities. Because this approach focuses on the assets alone, this methodology is reserved for businesses that are due to close down or have little to no goodwill remaining. As such, business owners will opt to liquidate assets for distribution.
The Discounted Cash Flow Methodology: Our business valuers will investigate the businesses forecasted cash flow statements and use these as an indication of market performance to determine business value. As such, this methodology is reserved for larger entities with the capacity to plan anticipated cash flow to track investment opportunities. As a result, we will use these statements to analyse any associated risks with the forecasts and any other factors to determine the fair market value.
No matter what your business structure or size is, the team at Darwin Business Valuations have the industry experience and knowledge to provide a professional business valuation report. If you are in need of a business valuation or are looking for more information, contact our expert team on (08) 7918 0898, see our FAQs or complete an online enquiry form.