Business Valuation and Commercial Valuations

What is a business valuation or commercial valuations and why are they necessary?

A business valuer will seek to accurately quantify future income, or more correctly, Future Maintainable Earning and then to quantify the risk to maintaining that income. Therefore, a company valuation or business valuation involves a completely different process to a property valuation.

Company valuation compared to property valuation: 

When a buyer purchases real property (land and buildings) there is a guarantee of tenure and a physical asset, however when purchasing a business a buyer often may receive no physical assets and the tenure will only be as strong as the current lease (if in fact a lease is being made available).

The concept of business valuation is therefore fundamentally different from property valuation or house valuation, where either a direct comparison to recent sales or a comparison to income yields is generally used to determine value.

In fact, the very nature of the competitive business environment means that it is only rarely possible to compare a business to like businesses in a comparable locality and so business valuers must use different, but objective and consistent methodologies when completing a company valuation or commercial valuations.

The issues that precipitate the need for a business valuation include:

• Proposed sale of all or part of a business
• Potential purchase of all or part of a business
• Partnership disputes
• Marital break-up and division of assets
• As part of a due diligence process undertaken by a buyer or buyer’s accountant
• Capital raising
• Stamp duty assessment
• GST assessment

The types of business typically valued by Propell National Valuers include (but are not limited to) child care centres, service stations, motels, hotels/pubs, quarries, restaurants, newsagencies and professional practices.

As experts in property, business and commercial valuations Australia-wide, Propell Valuers are the team to turn to, to ensure your next investment is the right investment.