Business valuations are usually sought for decisions to be made. The decisions usually will change to financial positions of those associated with the business concerned. Decisions could relate to anyone of a number of issues:

• The sale of a business;
• The purchase of a business;
• Business planning or restructuring;
• Partnership breakup;
• Family law decisions;
• Taxation matters;
• Resumption by Governments; and
• Stamp duty amongst others.

There are Standards which govern the work to be undertaken in valuing a business to address these issues. These Standards are mandated Governing Bodies such as the International Valuation Standards (IVS), the Law, Professional Associations, the ATO or other government bodies. Essentially, the application of Standards ensure that the work deals with critical issues that are to be addressed in the work being done.

The Bases of Value for the business valuation (sometimes referred to as the Standard of Value) could be any one of a number of bases. Bases* include:

• Market value;
• Market rent;
• Equity Value;
• Investment Value;
• Synergistic value; and
• Liquidation Value. *(IVS)

The premise* under which the work is being done also impacts on the purpose of the work. The premise of the business being assessed could be any one of a number, such as:

• Going concern;
• An assumed use;
• Orderly liquidation; and
• Forced sale; or
• Other premises that could be applied. *(IVS)

Those parties seeking business valuations should ensure the business valuation work requested is fit for the purpose for which it is to be used. The Standards to be applied will be used to scope the work to fit that purpose.

If you need more information, please talk to us: 

Negotia Group

1300-551-757

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
M: 0401 308 385
P: 1300 551 757
E: Click here to contact Kevin Lovewell
Member & Registered Business Valuer
Australian Institute of Business Brokers

Jessica Holbrook
P: 1300 551 757
E: Click here to contact Negotia Group
Business Analyst