It has long amazed me that people are happy to accept business valuations that are done from the isolation of a desk and from never seeing the physical business.
Many business valuations brought to my attention are written by business valuers who have not seen the business. An old mentor of mine had a clear tip for me – ‘don’t value what you haven’t seen’. And there have been many occasions when my view of a business enterprise has changed substantially when physically inspecting the business operation.
Fortunately, the International Valuation Standards (IVS) are onto this weakness in business valuation reports. IVS demands that a business valuer “must assemble, by means such as inspection, enquiry, computation and analysis to ensure the valuation is properly supported”. Further, where there are limits to the investigation, such as not inspecting the business as agreed to between the parties, “such limits must be noted in the scope of work”.
The focus of IVS, in my view, is for people seeking business valuations to be clearly informed as to the work the business valuer has to do, or has not done and to make sure what the business valuer is supposed to do is done and delivered.
The conclusion of business value is from the work done. It will obviously reflect on the extent of the investigations carried out. Where the business has not been inspected, you may need to reflect upon the quality and reliability of the business valuation delivered. Importantly, the business valuer may have to clearly state that the report does not meet the Governing Standards. Then, how much weight would you place on it in making important decisions?
Ask yourself ‘just how can someone value a business without physically inspecting it?’ There is probably the answer to who you should appoint and pay to deliver a business valuation report.
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
