Valuation Methodology Brisbane
Valuation Methodology Brisbane, Sydney & Melbourne are few areas in Australia where this is used.
Valuation Methodology Brisbane
I will discuss below the methods of valuation, their focus areas, strengths, and weaknesses.
CAPITALISATION OF FUTURE MAINTAINABLE EARNINGS
Focus area: Historic business performance and profitability. Assesses the sustainable future performance and capitalises the return base don the risk assessment in comparison to alternative investments.
Strength: Widely used and accepted. Relies on the past as a forecaster for the future. Level of usage provides some degree of compatibility.
Weakness: Assumes the business will continue as it has in the past. Less reliable where the volatility of earnings exists. Less reliable for immature companies.
Considered Uses: Mature business, Business with stable revenue streams. Business with reasonable certainty of future earnings.
DISCOUNTED CASH FLOWS
Focus area: Assesses the value of a business as the discounted value of the future free cash flows of the business plus the terminal value if any.
Strength: Provides strong technical background. Focuses on the future cash flow stream that is being purchased.
Weakness: Requires reliable historic and future cash flow forecasts. Requires an assessment of a wide range of industry and finance factors.
Considered Uses: Business with locked in forwarding revenue streams. Innovation or technology businesses.
NET ASSET BACKING
Focus area: The value of the business is the sum of the net tangible assets.
Strength: Inherently conservative. Typically low-risk assessments.
Weakness: Makes no allowance for goodwill or intangible value. Ignores any inherent value within the business.
Considered Uses: Business dominated by tangible assets. Business with its break up value likely to exceed the going concern position. Business with goodwill but other factors limiting reasonable certainty of a return on the goodwill.
COST TO CREATE
Focus area: Sets the value of the business at the total of establishment costs plus a limited premium for convenience.
Strength: Conservative. Reasonably easy to calculate. Tends to model markets.
Weakness: Makes limited allowance for goodwill or intangible value. Some subjective judgments required.
Considered Uses: Business with no intangible value and limited tangible assets. Microbusiness. Small business startup. Loss-making business.
RULE OF THUMB OR INDUSTRY MULTIPLIER
Focus area: Utilises or multiplier valuation models.
Strength: Aligns closely to the market experience. Generally easy to calculate.
Weakness: Has no real valuation discipline. Can be misleading to an uninformed market. Limited allowance for variance within the sector.
Considered Uses: Franchises, Businesses, Industry sectors with a large number of participants.
Valuation methodology Brisbane is discussed in more detail in our Business Valuation Reports. Our small reports start at $2,500 plus GST.
If you have any questions and require a business valuation in Brisbane, Melbourne and Sydney, please contact one of our friendly, professional and expert valuers today by calling us on 0422 026 728, or you click on the Email Us-Get Started button below.
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