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How to value a business for sale in Australia

See all articleshow to value a small business for sale in Australia
Business valuations
By
Lucas Couper
Lucas Couper
Director
October 4, 2018
5
minute read

Learn how to value your business before you sell it

The decision to sell a business shouldn't be taken lightly. Chances are it's one of the biggest decisions you'll make. After years of hard work, its natural that you want to reap the rewards of building a successful business.

A business valuation can reinforce your decision to sell. Or, it could indicate that maybe now just isn't the right time to sell. That's why it's important that your valuation is done right.

A business adviser like Nash Advisory can provide you with an accurate business valuation. They will provide you with an in-depth analysis of your business. You'll receive accurate data on your business's market value along with valuable advice on areas to improve.

There are several key steps you should take on your journey to selling a business. After initial market research and evaluations, we often recommend about 12 to 18 months to diligently prepare and execute a business sale process.

Get a free business evaluation worth $5,000 and discover how your business can improve its market value.

What's involved in a business valuation?

business men discussing how yo value a small business for sale in Australia

Valuing a business is a complex task. It's not just a matter of collecting all the key financial data around your business's transactions and assets; deep industry research is required. Without a proper understanding of your potential buyers, you'll never get a full picture of the marketplace.

A good business adviser will carry out a thorough market analysis to realise the potential of your business sale. With industry knowledge and access to reliable contacts, a business adviser is more qualified to carry out your business valuation.

An added level of comfort to the incoming buyer is a strong, capable, and experienced management team. This means the incoming buyer is able to see that the business is well-run and can continue to move in the right direction in the future.

Here is the Nash Advisory approach to valuing a business. We work systematically, so we know that nothing is left out.

Education

During the education phase of a valuation, we will spend time learning about your business. The more we can learn about your business, the more accurate their valuation advice can be.

We will spend time identifying the key performance drivers of your business. Examples of performance drivers could be your talented workforce or your business's exclusive products and services.

Research

After an initial review, you will receive a report outlining key areas where your business can use improvement. The next stage of a valuation typically involves research into current marketplace activity.

A business advisory service like Nash Advisory will broaden their scope and look into potential overseas markets in addition to the Australian market. We will determine who is purchasing businesses similar to yours and how much they are being sold for.

Final valuation

After weeks of in-depth research and market comparisons, we will typically provide you with valuation documents. You will also receive a strategy for increasing the value of your business. The strategy can vary from short to long-term in its expected duration.

At this stage, it's important to follow the advice given to you. Don't just assume that you can fast-track the value increase of your business. A significant increase in value can take time. It's important to take the time to address the key points laid out in the strategy by Nash Advisory. Through this, you are more likely to be in a better position to increase the market value of your business.

What can increase the value of my business?

Increasing the value of your business can all come down to how confident buyers are in the marketplace. There's a range of key aspects your potential buyers look for including:

  • Business strategy
  • Intellectual property
  • Brands
  • Growing revenue

Favourable marketing conditions can also help persuade a potential buyer. Taking advantage of market conditions will come down to timing on your behalf. Making your business available during a period of high demand can see a significant increase in value.

The personnel behind your business can also give buyers more confidence. A strong, capable, and experienced management team making informed decisions about the business will provide an added level of comfort to an incoming buyer that the business is well-run and can continue to move in the right direction in the future.

How to prepare your business for a valuation

discussion over how to value your business

Being prepared for a valuation is essential. A good business adviser will be diligent and thorough but they will still require sufficient access to your financial documents. Easy access to your financial records will help streamline the valuation process.

It's worth considering how accurate your business's financial records are. Any valuations of your business are worthless if the source of information is incorrect. That's why it's so important to have accurate bookkeeping procedures in place for all of your transactions.

Financial statements are great resources that indicate how your business has performed. Consider organising cash flow statements, debts, annual turnover, and profit and loss statement. Documents for your physical assets are also very relevant for business valuations. Try and collate any supporting paperwork for your business's machinery, buildings, equipment, and stock.

Intellectual property is another asset that can add a significant value to a business. Designs, blueprints, inventions protected under copyright all fall under this category. Employees often count as one of the most valuable assets of a business. Listings of employee details such as job descriptions, skills, experience, performance reviews, and salaries will prove just how valuable they are.

How Nash Advisory can help

At Nash Advisory, we're committed to helping you get the most out of your business sale. After all the hard work of growing your business, we understand how important it is to achieve a high return from an investment.

Our advisers use a range of financial and market-based methods to generate a value estimate of your business. We will look at significant indicators for business value which includes financial performance, growth prospects, margins, and contracts. After an accurate business valuation, we can guide you through the process of selling your business.

Our team of business advisers have successfully executed business sales, mergers, and acquisitions.Your business will have direct access to the knowledge and experience of our directors. From marketing down to negotiations, you'll receive expert business advice every step of the way.

Your business will have direct access to the knowledge and experience of our directors. From marketing down to negotiations, you'll receive expert business advice every step of the way.

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