Frequently Asked Questions

Succession Plus is Australasia’s largest Business Succession and Exit planning Advisory Firm.

Founded by Craig West, Succession Plus has operated for 12 Years in Australia and has recently opened operations on both the UK and NZ and has conducted over 700 formal business valuations.

Succession Plus has 23 advisers (in every capital city and several regional areas) as well as a head office team of experienced analysts, accountants and support staff.

Craig is finalising Doctoral research in utilising Employee Share Ownership Plans as a Business Succession tool and has written four critically acclaimed books educating business owners on employee incentives, succession planning, asset protection and exit strategies.

Needless to say, the team at Succession Plus know a great deal about SME business valuations.

Succession Plus complies with the Accounting Professional & Ethical Standards Board professional standard APES 225 Valuation Services which is effective for Valuation Services commencing on or after 1 January 2020, and also meets the requirements as outlined by both the Australian Taxation Office and the Office of State Revenue to prepare business valuation reports.

A business valuation is a good place to start before you make any kind of decision around strategic planning, succession or exit.

It may also be needed as a result of a tax restructure, a shareholder or partnership dispute or even a legal case including family law and estate planning.

As a registered Business Broker and Valuer holding accreditations from Chartered Accountants Australia, Succession Plus can provide both indicative and formal valuations.

APES 225 – Valuation Services

If you are valuing a business for the purposes of;

  • Value (growth or profitability) improvement
  • Benchmarking
  • Risk assessment
  • Early-stage Succession Planning or Partnership discussions

An Indicative Valuation Report will generally be required.

This kind of report offers a risk adjusted assessment of value, however is generally not accepted for binding or legal purposes.

Formal Valuation

If you are valuing a business for the purposes of;

  • Buying or Selling a business
  • Litigation and court proceedings
  • Taxation requirements

A formal valuation will be required.

Succession Plus complies with the Accounting Professional & Ethical Standards Board professional standard APES 225 Valuation Services which is effective for Valuation Services commencing on or after 1 January 2020.

The Succession Plus Valuation report is a 12 page document, analysing business risk, industry and market trends as well as detailed financial analysis of recent performance and forward projections.

According to Standard APES 225 Valuation Services , The Succession Plus report is a limited scope valuation report providing a conclusion of value.

There are a number of reasons a Valuation Report may be required, and the Report can be used for the majority of purposes:

  • Business performance measurement
  • Buy a business/ share
  • Sell a business/ share
  • Taxation
  • Stamp Duty
  • Asset Impairment
  • Estate Valuation
  • Dispute resolution

Taxation:

  • Changes in Capital Structure
  • Changes of Ownership
  • Capital Gains Tax Rollovers
  • Company Divestments
  • Company Acquisitions
  • Formation of a Tax-consolidated Group
  • Entry to a Tax-consolidated Group
  • Exit from a Tax-consolidated Group
  • Thin Capitalisation

Valuations

In selecting the most appropriate valuation methodology to apply, we have considered the methods that are noted as appropriate. We capitalise the assessed maintainable earnings, before abnormal and extraordinary items, after adjustments made by us to exclude the effect of non-recurring items and taking care in isolating proprietorial benefits.

The assessment of a valuation is prepared based on normalised net profit after tax (NOPAT). In assessing the level of maintainable earnings, we consider among others the following factors:


  1. Past earnings performance including operating results for the years input ended 30 June based on management accounts.
  2. Maintainable earnings, based on those historical performances on a low and high basis
  3. Historical versus prospective earnings are considered in the earnings multiple/capitalisation rate.

At this point, this function is not available, however the ability to add comments to easily identify what the addback relates to will be included in the next release.

The key focus for adjustments is in the current year. Adjustments can only be made to the current year, however the ability to adjust multiple prior years will be included in the next release

In the event that a surplus asset is held, the valuation tool will treat it as a separate asset, and add the value to equity, not goodwill.

The key factors in valuation are return, profit and risk. Data points from each of these factors feed into our algorithm.

The valuation Multiple relies heavily on a risk scoring process, which evaluates the risk inherent in the business based on variables across 7 key risk areas;

  • business overview statistics
  • business performance and ownership;
  • marketing and competition,
  • regulatory and legal,
  • operations,
  • location
  • financial

The algorithm considers industry benchmark data, as comparable market data is difficult to reliably acquire in Australia. Most of the data that is available as comparable is based on business sales, however the price that the business was listed for by the Broker is most often used, rather than the privately negotiated actual sale price.

  • The Total Value is inclusive of goodwill.
  • The Goodwill Value is the calculation based on a multiple of profits
  • Fair Market Equity Value includes goodwill value and net assets.

The Succession Plus Valuation Tool conforms to strict security protocols:

  • Data Sovereignty (all data based in Sydney)
  • Advanced Encryption Standard (AES) with 128 bit encryption
  • Moreover, we are accredited with Xero to access their financial data. In order to attain that accreditation, there is a significant amount of testing and security, to ensure security of data access and storage.
  • Your link to Xero is only ever active for a max of 30 minutes so the link is not continually open.

Typically, when a business valuation is required - the purpose is a very important factor in terms of the complexity and cost of the report. For example, a valuation report to be used in court litigation regarding an estate planning dispute by a family member is a completely different prospect to an owner looking for a valuation to see if it is worth selling the business.

Valuations fees can vary from as low as $3,000 for a fairly simple small business up to $30,000 for a more complicated structure of related entities and offshore trading etc.

Given that our tool can automatically extract the financial data and the risk scoring is all completed online - the time involved is not really the issue. The report is prepared and signed off by Succession Plus and is covered by our PI insurance so that’s not an issue either.

In terms of cost most valuations can be charged at approximately $3,000 - $5,000, remembering that a lot of the value is not just in the report but in the process - helping the client understand what drives the value and what they can do to improve it overtime.

The ongoing work to help make and monitor these changes (and update the valuation accordingly is also a great potential source of new and interesting work for most firms

Succession Plus has transitioned its tried and tested valuation tool into a digital environment, enabling a more streamlined and timely valuation service for our subscribers.

Succession Plus can interface real time through API connections drawing data from Xero, MYOB and other financial data sources.

Advisers are able to prepare a valuation report in less than 20 minutes.

The Succession Plus Valuation Tool is completely changing the way SME Business Valuations are done in Australasia.

Now, Accountants can prepare an Indicative valuation online;

  • In as little as 20 minutes
  • From as little as $100
  • For a service the industry standard fee charged is between $3k - $8k

Succession Plus enables Accountants to take back control with in-house valuations and no loss of margin. You determine what you charge for your valuations and it goes directly to your Practice bottom line.

Save time with integrated data feeds, a valuation tool that talks digitally to Xero, MYOB and Quickbooks.

For future releases, and in conjunction with PhD Researchers at the University of New South Wales utilising AI, we are developing an intuitive web application to better predict and drive improvement in SME business valuations.

No.

The special purpose valuation report is prepared at the request of the Accountant or Client. The Valuation Report is disclaimed as having not been prepared for any purpose other than to establish a fair market value of the business.

Refer to the Valuation report page 8 S 3.4 for more details.

Tool functionality

At present, due to the Xero Partnership, we have been focusing on the Xero Tool. We are looking at direct connection into MYOB and QuickBooks as well in the version 2 release in June.

Presently, you can choose the manual valuation icon, go into MYOB, extract that data and manually import it via CSV file, and then produce the same valuation.

The Valuation report produced is a 12 page document, compliant with APES 225 Valuation Services Accounting Standards

The report provides;

  • A capability statement around the report, and how it's being prepared.
  • A disclaimer as to the purpose of the report and reliance on representations and instructions provided.

Market value considerations and a summary of the key aspects such as;

  • Which business is being valued
  • What type of businesses
  • Which Industry
  • Business valuation purpose
  • Who has performed the valuation
  • Background, sources of information
  • Independence of Valuer Statement
  • Our approach to valuation
    • Methodologies considered
    • Selected Methodology
  • Financial Summary
    • P&L
    • Balance Sheet
  • Valuation Summary

Version 2.0 release

Inclusions:


  • Adjustable FTE values for part time staff
  • MYOB data transfer automation
  • Quickbooks data transfer automation
  • Comments and notations against Addbacks
  • Normalisation and addback edits for prior year periods
  • Risk Analysis Report
  • Customised Practice Branded Reports
  • Practice dashboard showing which businesses you have valued, when and the $ valuation.



If you require further assistance, please contact valuations@succession.plus