Frequently Asked Questions

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

please use “Feedback” widget on the right edge of the page or email us on valuations@succession.plus.

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.

it represents true value of a business (as a going concern). In other words a value of a cashflow-generating enterprise.

Enterprise Value is calculated by multiplying capitalisation rate by a weighted average Normalised Net Profit After Tax

Year 1: 5%, Year 2: 15%, Year 3: 30%, Year 4 (most recent): 50%

1. We add/subtract provided addbacks/deductions from profit per year to calculate Normalised Net Profit Before Tax per year
2. We apply notional tax expense at the appropriate Tax Rate to calculate Normalised Net Profit After Tax per year
3. We apply above weighting to calculate weighted average Normalised Net Profit After Tax

it shows the value of shares / equity of the business entity

it is calculated by adding non-operating and surplus assets and subtracting the debt net of cash from Enterprise Value

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.

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