“The use of market-based inputs should be maximised” (IVS 2017) in business valuations. Reconciling business information against market evidence is essential if a realistic assessment of business value is to be determined. It brings ‘practical reality’ to the valuation work in our view and ensures compliance with the Standards governing the report.
Small and Medium Enterprises (SME) businesses are influenced by the personal preferences of owners. The selection of ownership entity, financial recording, reporting and business practices mean that SME business information and data can vary widely in terms of verifiability, quality and quantity.
There are hundreds of business categories, with varying sizes, cultures and record keeping practices.
Business broking industry experience is essential in understanding the sometimes subtle differences between businesses when valuing them.
Business broking industry experience is also essential in finding businesses with similar characteristics. So too is the verifiable data needed (again, in terms of quality and quantity) in ‘arm’s length’ transactions. Again, market knowledge and experience in SME sales is an important asset for a business valuer. A report underpinned by absence of comparable market evidence and incorrect judgements may result in work that does not comply with the governing standards.
Those seeking business valuations basis on the Standard of Value ‘market value’ should be aware not all business valuers are participants in the business sales market and do not have access to market evidence.
If you need more information, 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
