A Pokolbin winery, an engineering consultancy in the Newcastle CBD and a steel fabricator at Beresfield are all tested against the same three approaches. What differs is the evidence a buyer of each would rely on, and a sound report says why that evidence won out.
Every business in Newcastle and the Hunter is valued by testing three national approaches. The income approach prices the earnings the business can sustain, the market approach compares it with prices paid for similar businesses, and the asset approach restates what it owns and owes at current values. A certified valuer weighs the results and explains which one leads.
What is the profit this business can keep making worth in today's dollars, once the chance of it falling short has been allowed for?
Read the methodWhat have buyers actually paid for comparable businesses, and what earnings multiples do listed companies in the same field trade on?
Read the methodIf every asset were sold at today's prices and every debt were settled, how much would be left over for the owners?
Read the methodEach approach the valuer applies produces its own range, and the report places those ranges next to each other. The valuer then states which one tracks the way a genuine buyer would price this business, treats the others as cross-checks and lists any approach set aside with the reason. A Beaumont Street restaurant in Hamilton, with regular venue sales to draw on, is weighted towards the sale evidence; a Beresfield machining shop whose worth sits mainly in its CNC plant and its freehold is weighted towards the assets.
That weighing gives a range for enterprise value: the business as a whole, before anyone asks how it is funded. To reach equity value the valuer takes off borrowings, then adds or deducts surplus cash, assets the business could trade without and liabilities unrelated to trading, which leaves the value of a controlling interest that can be sold. A discount for lack of control or marketability comes into play only after that, only where the interest is a minority stake or has no ready buyer, and always with an explanation of its size.
Reviewers read the reconciliation before anything else. An opposing expert in an oppression claim before the Supreme Court of New South Wales, an ATO officer checking a small business CGT concession and a bank's credit team assessing a Hunter mining services contractor are all asking one question: did the figure come out of the evidence, or was the evidence collected to support a figure decided at the start?
Who will rely on the report decides how much of that reasoning is put in writing. An Indicative valuation is for internal decision-making and is not written for third party reliance. A Summary report sets out the approaches applied and the reasoning behind them, and a Detailed report applies and reconciles all relevant approaches in full.
For internal decision-making. Useful for testing an offer, setting an expectation before a negotiation, or deciding whether to go to market. It is not written for third party reliance.
Sets out the approaches applied, the normalisation adjustments made and the reasoning behind the conclusion. The usual choice for a sale, an ownership change or a finance application.
Applies and reconciles all relevant approaches in full. The level required where a court, the ATO, a lender or another expert will review the opinion.