Business valuations are like building inspections – a small investment up front could save you A LOT OF MONEY in the long run. A business may look appealing on paper, but in reality, it could be a lemon. All too often we see business owners who go to sell their business, only to find that they significantly overpaid years ago when they purchased the business.
This is devastating for the business owner who must come to the realisation that the business they have worked so hard to grow may be worth less than what they originally paid for it. A key pitfall for buyers is over valuing the goodwill inherent in a business. Goodwill is the value associated with intangible factors such as brand, reputation, customer database, supplier relationships, location, etc. – it essentially represents the value of the business over and above its tangible and identifiable intangible assets.
Valuing goodwill is a complex specialist field. Sellers will often significantly overstate goodwill, while buyers will understate it. A good business advisor will work with you throughout the business valuation process, helping you to consider the business from different angles and asking the right questions. In addition to helping you understand the underlying value of the business, a good business advisor will help you to understand the key opportunities and risks in the business, as well as guiding you through appropriate due diligence processes.
If you are looking at selling your business, we can advise on how best to prepare the business for sale to maximise value. If you are considering buying or selling a business, then we strongly recommend talking to a professional business advisory team.
Contact the professional team at: Strawbridge & Associates Limited, Chartered Accountants, Nelson. Ph: 03 548 1549, Email: info@SALCA.co.nz For more info contact Lisa or Michael at strawbridge.co.nz www.strawbridge.co.nz