Every business owner is naturally curious about just how much their business is worth. However, for every business that sells at an attractive price, there are others that struggle to sell, let alone fetch a premium. The question is, what makes a difference?
When you come to sell a business the first question is, what are you selling? In most cases, this is fixtures and fittings, plant and
equipment, stock on hand, and the goodwill of the business. Generally, a buyer won’t want to purchase your liabilities or your business
structure, nor will they want to collect your outstanding debtors. Most business sales become a sale of business assets.
These assets are relatively easy to value with the exception of the goodwill. The value of plant and equipment and trading stock can
generally be agreed. The tension tends to be around the value of the goodwill because goodwill is made up of many intangible assets that
can’t be readily quantified.
We can all agree that there is value in these assets but the question is, how much? Goodwill is basically the value of the future free
cashflow of the business. Based on how your business is structured, it is the value of the profits the business can generate in the
future. This is what a buyer is prepared to pay for.
If a buyer has a reasonable certainty of profits and free cashflow in the future, then this is worth something. By comparison, a start-up
business will have a higher level of risk and no certainty that profits can be generated. In general, a new business may need to trade for a
number of years at a loss before it can establish itself and generate profits. Goodwill is what you are prepared to pay to avoid the
risk and the ‘time to establish’ factor.
So, what influences business value and what will people pay for?
It is possible to get a price that is widely different from the norm. Unique businesses, unique circumstances, and unique opportunities can
always produce ‘an out of the box’ price. If you can build something unique, then you may achieve a price beyond normal expectations. At the
end of the day however, the market will set the price.
If you are planning on selling your business, identify who your buyers might be. There could be a purchaser who is prepared to pay a large
premium to own your business because of the accretive value or because it is pivotal to their growth strategy.
And, even if you are not thinking about selling your business, the reality is that one day you will. If you build your business with this in
mind, then you should look to do the things that will grow your business value from year to year.
Our expert accounting and business consultants can help ensure a smooth transition when you're ready to step out from your business.
Director and owner Jon Robbins first engaged SMART Business Solutions as their accountant in 2014. Jon was looking for a proactive accountant and business advisor who would listen to him, take the time to understand his business, and work together collaboratively.
The 2020-21 Federal Budget is a road to recovery paved with cash. Some of the measures are aimed at addressing the harsh lessons COVID-19
has taught us and seek to centralise production back in Australia to ensure our industries can be self-reliant.
Reflecting on the past 6 months, particularly since the effect of Coronavirus on financial markets, I am concerned that many investors do not have a clear and tailored investment strategy. My observations are that investors seem to be failing to understand one basic investment principle; 'The higher the return the higher the risk’.
The updated alternative tests released by the Commissioner of Taxation are broadly similar to the alternative tests that were released in connection with the original decline in turnover test. However, there are some key differences.
In this pragmatic webinar we help you identify arrangements at risk of triggering significant superannuation guarantee liabilities and explore the steps to minimise that risk. This is an issue that is not going away any time soon.
The release of Australian-listed company earnings gave local investors something other than virus-related news to focus on. Earnings rose ~15% in the June quarter compared to the first three months of the year. This was ahead of consensus expectations, but overall the results were underwhelming as anticipated.
To access JobKeeper payments from 28 September 2020, there are three questions that need to be assessed:
Is my business eligible? Am I and/or my employees eligible? and What JobKeeper rate applies?
We’ve summarised the key details in this update.
In this practical webinar we help you identify arrangements at risk of triggering significant superannuation guarantee liabilities and explore the steps to minimise that risk. This is an issue that is not going away any time soon.
Over 2 days, the Victorian Government has announced two new support packages delivering over $3 billion in “cash grants, tax relief and cashflow support.
If you are selling your business, merging, acquiring, or inviting in new investors, you need to understand the value of your business. But, to what degree does the pandemic impact on value?
When it comes to choosing whether to hold personal insurance inside or outside superannuation, both options have pros and cons. Which one is right for you?
Some people enjoy retirement more than for others – and one of the secrets to success is to start planning well in advance. We spoke with a 67-year-old who has begun his (semi) retirement with style, for his real-life tips on how to make your retirement dreams happen.
Covid-19 developments continued to dominate attention. There were spikes in the number of new infections in both Australia and overseas, suggesting an economic recovery may be delayed.
This webinar looks at the common issues that arise in connection with lease arrangements and the special rules that are aimed directly at tenants and landlords. We also look at specific issues that arise when lease arrangements are adjusted in response to the impact of COVID-19.
COVID-19 has had an impact on many SMSFs. We look at the key issues.
When deciding which investments are right for you, it is important to understand the trade-off between risk and return and how to manage investment risk.
It’s a good idea to regularly revisit your personal insurance to make sure it’s giving you the level and type of cover you need at your specific stage of life.
By setting goals, planning ahead and being smart with your savings and debt strategies – you can actively grow your wealth even from a
modest start.
Many investors become concerned when volatility occurs in global financial markets – particularly about the impact on their superannuation and other investments.
If you’re just starting out as an investor, there’s a lot of information to absorb. This fact file defines and explores the pros and cons of each asset class.
Interest rates are the cost of money when borrowed or loaned, and are used to control inflation and economic growth. But why do interest rates rise and fall, and how can they affect you?
Some retirees who need aged care may prefer to stay at home. Whilst others may need or prefer the assistance that a residential aged care facility can provide. .
Gearing can be an effective and tax-efficient way of building your investments over the long-term. While it can increase your investment returns, you need to be aware of the risks involved.
One of the most effective ways to provide some or all of your required level of income in retirement may be via a regular retirement income stream such as an account-based pension or an annuity.
If you have been made redundant, it is important to understand the financial issues involved, your entitlements, and how to make the most of your redundancy payment with the help of your adviser.
Tax planning is more than just a financial necessity—it's a strategic advantage for businesses of all sizes. By proactively managing your tax strategy, you can significantly reduce your liabilities, enhance cash flow, and ensure full compliance with ever-evolving tax regulations.
