How a Virtual Business Valuation Works in Australia

One of the most crucial steps in putting your online business on the market in Australia is having a business valuation done. Without it, you can’t actually put an accurate price on your business. Not only that, they can also function as a unit of measurement to show you your business’s growth and help you identify areas that need improvement. Regardless of whether or not you sell your business, performing a valuation is always a good move. But how does it work?

What are the factors that impact the value of your business?

One of the keys to understanding how business valuations work in Australia is learning what factors in business influence its value. Here are some factors that will be considered when your business is evaluated:

1. Years in operation

Businesses that have been around for a while already have a measurable history of performance, whether good or bad. Their track record would show their sales, customer acquisition, and their overall financial health over their lifetime. Because the scale of costs to start a business is fluid, the chances are that starting that business from scratch would be more expensive. This is all taken into account. Unfortunately, younger businesses might lack the records or evidence of their financial performance

2. Your assets

Assets also play a significant role in valuing a business. That includes both tangible and intangible assets. When we refer to tangible assets, we mean things like property, machinery, tools, or anything tangible that the business owns and uses for its operations. Intangible assets refer to things like intellectual property, client data, and a reputable brand. All these things are taken into account when calculating the business’s worth. 

3. Current financial position

Finally, probably one of the most influential aspects that contribute to your business valuation is its current financial position. Put simply, businesses that are in a stronger financial position usually have a better chance of receiving a better valuation than businesses that are struggling financially. 

What are the different methods of valuation?

Business valuations involve a lot of different factors. Therefore, there is no one set way around providing a business with an accurate price to introduce to the market when they’re ready to sell. However, these are a few methods that are often used to figure out the most appropriate sales price:

1. Current Market Value

By doing a little bit of research, you can figure out what your business’s current market value is. Consider looking at what industry you’re in. Is there projected growth expected for that industry, or does another rising industry or invention pose a risk of your products or services being obsolete in a few years? 

You can also find some pretty accurate data regarding your business industry on the Australian Bureau of Statistics website. By doing this, you can gain some insight into how your business will do in the current and future market conditions. 

2. The return on investment

Return on investment is a common method used. Basically, your ROI represents how much your business has made with its costs subtracted from it. The ROI is a good indicator to the financial health of your business. 

3. Entry cost into the same industry

We touched on this earlier. By calculating how much your business would cost to start in the current market conditions, you can provide yourself with a fairly accurate valuation. Include things like licensing fees, permits, machinery, tools, and basically anything you would need to get your business to the point where it is today. 

4. Valuation of your assets

Like we said earlier here, your assets, tangible and intangible, also add to your businesses value. However, your liabilities need to be included too. A helpful way to workout your businesses asset valuation is to add your assets and subtract your liabilities from them. This will leave you with the final figure. 

5. Apply the comparable sales method

Lastly, the comparable sales method can be used to estimate your business’s worth based on what other businesses in the same industry and of the same size are selling for. Again, this will require you to do a bit of research, but it should also provide you with a good benchmark figure to start with. 

The importance of getting an expert to value your business

When doing an accurate business valuation, we recommend using a certified professional to evaluate your business. In this case, you would need to hire a business broker. Not only do they know how to do a business valuation, but they’re also trained to help you improve your chances of getting a higher price and could help process the sale for you, too. Trust us, this could take a heavy load off your shoulders. 

We recommend chatting to Lloyd Business brokers. As one of the best business brokers in Australia, Lloyds Brokers has assisted in dozens of valuations and aided in multiple business sales. 

Conclusion

Ultimately, when you have your business valuation done, it would be ideal to try and improve on any areas where you felt your business felt short or could have done better. Once you’ve worked on those areas, have the valuation done again. The result should be that your business price increases.