The value of a Small to Medium Enterprise (SME) comes principally from the benefits (usually profits) received in owning it.
The value of a business enterprise increases as the risks associated with realising its future profits reduces.
Central to the concept of increasing the value of an SME business to a prospective buyer is taking steps and making decisions that reduce the risks to future profits.
Most SME businesses are leasehold operations. Their right to trade is governed by the terms and conditions of the property lease associated with the business premises they occupy. The lease tenure (the timeframe in which the business can occupy the premises) is defined in the lease. The term of the lease defines the period for which the business can trade. It is not a precise statement because, on occasions, it may be reasonable to assume a lease may be renewed, or a new lease entered into. But, assuming periods of tenure beyond that defined in the property at lease carries risks.
Long leases secure the right to occupy a business premises. Long leases usually add value to the business enterprise in the eyes of prospective buyers. It secures the timeframe in which the business can trade and make future profits.
Graham Long
Disclaimer: The views expressed in this article are those of the Writer. The information is not meant to be exhaustive. Readers are responsible for making their own inquiries and assessments as to the truth and accuracy of all the information given and should seek advice from professionals. No liability (in contract, tort or otherwise) will be accepted for any loss or damage incurred as a result of reliance upon any material contained in this publication or any information or advice provided in this publication or incorporated in it.
Kevin Lovewell
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Member & Registered Business Valuer
Australian Institute of Business Brokers
Jessica Holbrook
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Business Analyst
