What’s the difference between a business appraisal and business valuation?

Business valuation

Business Valuation

What is the difference between a business appraisal and a business valuation in Australia?
The short answer to this question is qualifications and experience.
There are numerous associations and organisations that bestow certificates on participants for completing the bare minimum of training. This is all very well, until you turn up at the Family Court or the Supreme Court with your business valuations prepared by one of these participants
If all you require is a rough estimate of a business's worth, then an appraisal may well suit. However, if you requires a comprehensive business valuation, that is defensible, and will stand up in Court, you need a valuation prepared by someone with accounting , financial and business qualifications. Keep in mind that a Real Estate and Business Broking Licence are one and the same. This means that the person who sold you a unit, can then put his or her business broking hat on, and prepare a business appraisal

Alarmingly, not only are some of these appraisals naive and incompetent, the prices charged are also higher than charged by court accepted valuers. So what are some of the factors needed to produce a reasonable and defensible view of the value of a business:

Business Valuation Factors

• Which valuation methods – you would need to explain your choices and demonstrate why they are appropriate

• Valuation metrics – you would need to explain your choices and demonstrate that you have applied them appropriately

• The valuation date

• The purpose of the valuation

• Basis or premise of your valuation – for example, valuation of the business on a going-concern basis

• Description of the business

• A summary of the corporate structure and management of the business

• Market information – including key customers and spread

• Operations – including information such as manufacturing and production, service delivery, research and development

• Products or services – including information such as product description, product pipeline, pricing and the basis of pricing (for example, market or cost-plus)

• Financial requirements and financial structure

• Strategic and corporate development initiatives

• Sales and marketing strategies –

• Adjustments for items such as non-operating assets (for example, investments) and excess cash

• Can the business valuer explain their outcomes in everyday language and substantiate their opinions if under intense scrutiny.

If you require a business valuation prepared by a court appointed expert witness, contact Lee Goldstein.

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