Your business should be one of your biggest assets – but what’s it actually worth? Whether you want to sell your business, adjust the ownership, borrow, or calculate your net worth, a business valuation can be extremely useful.
Figuring out a dollar value means factoring in lots of variables, but earnings and assets are the biggest value-adders.
Earnings and assets The two most important value drivers of your business are earnings and assets. These are the main selling points – strength of earnings and/or valuable assets will make any business more attractive.
Other intangible factors can play a part in adding value, like goodwill and potential. These can definitely make a business more saleable, but they aren’t always easy to put a price on. Coming up with an accurate valuation on a privately-owned business can be tricky.
No single formula for finding a value
The most common way to value a business in New Zealand is: EBITDA x Industry multiplier. EBITDA is earnings before interest, tax, depreciation and amortisation. Each industry will have a multiplier, or one can be estimated by looking at other local and international sales. That’s a basic starting point, which can then be tweaked depending on the strengths or weaknesses of the individual company.
There are also plenty of other methods for arriving at a valuation. Sometimes a business will be sold for a multiple of revenue, or simply for asset value. There are so many variables that it’s tough to estimate on the back of an envelope; that’s where we can help.
We can value your business Valuing a business takes a bit of skill and a bit of experience. If you’re considering selling, we can help you put a value on your business, draw up accounts to show a potential purchaser, and give you ideas about how to get the best price.
You might need a business valuation for other reasons – for the bank, maybe, or for a staff share scheme. Once again, we can work with you to figure out what your business is worth. We’ll look at all its assets, its earnings and the intangible factors that make your business uniquely appealing.
About Pathfinder Solutions
Pathfinder Solutions advisory team members have either owned or managed businesses, or are investors themselves, so we know first-hand the challenges you face in your world.
Sure we’re Accountants, but the best solutions in business come from focusing on more than just the numbers. Our real-world business experience delivers just that.