Before you start
- Start by defining the decision the valuation needs to support.
- Separate reported profit from earnings a buyer could reasonably maintain.
- Use a method and value range that fit the business and available evidence.
- Confirm the required report scope with any lender, lawyer or other intended user before engagement.
What an independent business valuation should answer
At its core, a valuation should explain what the business is worth at a stated date, for an agreed purpose and on stated assumptions. The conclusion is more useful when the reader can see how the financial evidence, adjustments, risks and methodology connect.
That matters for Sunshine Coast SMEs because two businesses with similar reported profit can have very different risk profiles. Customer concentration, owner dependence, staffing, lease terms, recurring revenue, capital requirements and exposure to seasonal trading can all affect the earnings a future owner may be able to sustain.
Common reasons for obtaining a valuation
The appropriate scope depends on the decision. A short commercial assessment may be suitable for an early pricing discussion, while a decision involving third-party reliance may require a fuller report and agreed instructions.
- Preparing for a business sale or testing an asking price
- Assessing a proposed acquisition before making an offer
- Planning a shareholder, partner or succession transition
- Supporting strategic planning and understanding value drivers
- Responding to a lender or adviser request, subject to their scope requirements
Write a five-line brief before asking for a quote
A short written brief helps an adviser quote the right work. You do not need to calculate the value yourself. Answer these questions first:
- What decision will the valuation support, and when must it be made?
- What is being valued: the operating business, all company shares or one shareholder’s interest?
- What date should the valuation relate to?
- Who will read or rely on the report?
- Are the premises, stock, equipment, cash and debt included in the question?
If a bank or another adviser requested the report, get their requirements in writing before commissioning it.
Evidence usually considered
The exact information request is tailored to the engagement. For an established SME, the review will commonly start with several years of financial statements and tax returns, current management accounts and enough operational context to understand what sits behind the numbers.
- Historical revenue, margins, profit and balance sheet movements
- Owner remuneration, related-party items and discretionary expenses
- Non-recurring income or costs and unusual trading periods
- Customers, suppliers, staff, premises, systems and key-person dependencies
- Working capital, required equipment and foreseeable capital expenditure
Local knowledge is context, not a substitute for evidence
Consider two hypothetical Sunshine Coast service businesses with the same annual profit. One has repeat commercial customers, a supervisor who schedules the work and a lease with several years remaining. The other depends on the owner for every quote, one customer accounts for much of its revenue and its lease expires next year. Their profit figures alone do not tell a buyer how much risk they would inherit.
For a seasonal business, compare monthly trading with the same months in prior years. For a trades business, separate completed work from the order book and ask whether work booked under the current owner will transfer. For a premises-dependent business, check the lease and assignment conditions. These are useful local questions because they test the business itself, rather than relying on a general view of the Coast’s economy.
Choosing the right level of work
Before commissioning a report, identify who will receive it and what they need it to do. A valuation prepared for a private commercial decision may not meet the requirements of a lender, court, tax adviser or regulator.
Confirming purpose, intended users, valuation date and scope at the outset reduces wasted work and makes limitations clear. Complex, contentious, tax, legal, multi-entity and forensic matters may require specialist instructions outside a standard commercial SME engagement.
Sources and further reading
The examples in this guide are illustrative. These references explain the underlying principles and offer further practical guidance.
- Business Queensland: Valuing a business to buy or sell
An introduction to valuation preparation and the factors relevant to a sale or purchase.
- Australian Taxation Office: Market valuation for tax purposes
Explains purpose, valuation date, evidence and report scope. Tax valuations have their own requirements; a commercial report should not be assumed to meet them.
General information for Australian business owners. A valuation depends on the business, valuation date, purpose and evidence. Seek advice on your circumstances before a transaction or ownership change.
Apply this to your business.
Tell us the decision you need to make. We can help you choose the right level of valuation work.
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