Business Appraisals and Benchmarking
Lloyds Business Brokers are uniquely qualified to conduct Business Appraisals and Market evaluations for all classes of privately owned businesses, up to a valuation of $50,000,000. We are able to perform market evaluations of Business Assets and Goodwill for the purposes of:
Benchmarking of business performance in terms of a Business Plan, or for Investment Portfolio Management
Partnership dissolutions, disputes, buy-outs
Marriage breakdown, property settlements; divorce proceedings
Succession planning, deceased estates
Legal disputes, property resumptions, compensation payouts
Establishing proper value when buying or selling a business.
When carrying out an appraisal, we conform to the performance guidelines as set forth by the International Valuation Standards Committee (IVSC), in addition to the "Guidelines for the Valuation and Disclosure of Venture Capital Portfolios" as adopted by the Australian Venture Capital Association" AVCAL standards. We also carry appropriate Professional Indemnity Insurance.
A brief Industry Profile of our Managing Director Garry Stephensen, Founding Director Rudy Weber, Melbourne Director Chris Butchers and Senior Associate Kevin Sutherland, is available for your perusal on this website, as well as a list of business sold in recent years. As you can see, our experience is concentrated in the area of "niche market" businesses in the value range from $1 million to $50 million.
We bring to the task a unique blend of qualifications and backgrounds which make us ideally suited to this assignment. Our valuations have been tested successfully in a number of Family Law Court matters, Partnership Disputes, Property Settlements and Business Investment decisions.
Most importantly, however, alongside our personal qualifications, the main benefit we offer is MARKET EXPERIENCE. For all the considerable number of businesses we have actually sold, appraised and valued, it needs to be pointed out that for every business finally sold, we have examined another hundred or so business that have not sold, and for each of these, we have dealt with the reasons of probably ten prospective purchasers, as to why they would not purchase that business.
The result is, we have learned from personal observation what real buyers are likely to pay for any given business, and the reasoning behind their decisions. In valuing your business, we generally adopt the "Venture Stage Investments - earnings basis" approach, as set forth in the AVCAL Guidelines, unless this is inappropriate for specific reasons. Our belief is that the main determinant of value in a going concern - the "key factor" that a buyer would be looking to establish - is the "future maintainable earnings" of the business. There are a number of indicators available to enable us to establish this:
- Past historical performance
- Current performance
- available markets
- Management projections.
All four need to be examined carefully, and weighted, as to whether the business is declining, steady, or growing.
The approach, briefly, will be to examine the past performance of the business, and if appropriate the "budget to actual" performance, to compile a "reliability factor" to be applied to future earnings forecasts, to build a reliable valuation formula.
One of the problems in comparing the performance of a business from year to year, and in determining its "true" profitability, is that, in many cases Accounting Standards may vary from year to year. Particularly with privately-owned businesses, there are often "Proprietorship" expenses mixed in with the actual operating costs of the business; research and development and capital improvements costs are expensed, rather than capitalized, and generally, adjustments for tax-effective accounting need to be made, to enable fair assessment of performance over time.
We work with Directors to produce, from the books of the Company, a set of figures which all concerned agree, reflects this "true performance".
Having devised a valuation formula, and determined the "true performance" of the business, the final and most critical issue remains to establish the appropriate Price/Earnings ratio.
It is generally accepted that the appropriate Price/Earnings ratio can vary from industry to industry, and even from business to business to business within an industry. It is our experience that it can also vary for a particular business from buyer to buyer, as each buyer will assess the price he can afford to pay for a business in terms of the synergies available, and the value he can add to the business and his own as a result of the acquisition.
For this reason, in order for us to determine the best and highest value for the business, we need to examine the exit strategy, and identify the best-qualified class and location of prospective purchaser.
We regularly undertake, as a routine part of our business, both national and international business and industry searches, for both buyers and sellers. All the necessary information to perform this valuation is available to us.
The price for preparing a Appraisals will vary from business to business, depending on the on the complexity, and/or the ease with which reliable evidentiary material can be obtained. It would normally be calculated at an hourly rate of $350.00, and the normal time taken might range from 5 to 50 hours.