17 November, 2020 / IN Business valuations / by Tony Carter
Business valuations play a very important part in succession planning for any business.
If you overestimate the value of your business then you could reduce the chances of a successful sale, and no one wants to underestimate the value of what is often their most valuable asset.
A business valuation also provides valuable insights into what drives value in a business, allowing you to put in place strategies to improve the value of your business. Relevant factors include customer contracts, location, employees, products, or a combination of all of these and more.
With enough time and the right advice, any business owner can use this knowledge to maximise the value of their business. The earlier you seek this advice, the earlier you can put in place the measures that will maximise your sale price.
Determining a realistic value of the business can often be done with a Valuation Calculation. This type of valuation uses the same methodologies of a Full Valuation Report, however due to lesser reporting requirements it can be done at a reduced cost. This is where Lambourne Partners can step in, and below is a recent scenario that provides a good example of how we could assist you and your business value.
Valuation Calculation: A Recent Example
William started his business from scratch twenty years ago and is achieving consistent financial results. William’s son started working in the business as a tradesman ten years ago and moved up through the ranks to a senior management role.
The business recently experienced some downturn during COVID-19 but otherwise has come out the other side unscathed. However, William has used this time of uncertainty to reassess his long terms plans and decided it is time to step back from the business.
He wasn’t sure if he wanted to sell the business or pass it on to his son, but he knew it was time to give these options some serious thought and planning, and called me to assess what his business is worth.
If William decided to keep the business with his family and transfer it to his son, the valuation report was useful in documenting a fair value should he choose to gift some or all of the business to his son. This is helpful in avoiding any family disputes (which often surround the transfer of wealth to the next generation), as William has other children not involved with the business or its ownership.
The Valuation Calculation also allowed William to explore the potential sale of the business to other interested parties, which ultimately proved successful with the business selling to one of his main competitors, for a price above what William initially thought his business was worth.
How We Can Help
In the above example, it was a relatively quick process, but succession planning can be a long process with the Business Valuation specialist being an important first step. They provide an independent and unbiased valuation report which tells you how much the business is worth today and helps you understand what generates this value.
If any part of William’s story sounds like yours, contact Tony Carter on 02 4969 6600 or fill in the form below and we to discuss how a Lambourne Partners Business Valuation can help you.