You might be surprised to know that business valuations are not regulated in Australia, so there is no such thing as a certified valuer. Scary? I think so…who can you trust?
From time to time you will see people that appear to be certified, but bear in mind that they have just received a certificate from a specific organisation, which carries no weight outside that organisation. You might see these things on the resumes of business brokers or real estate agents. There is no universally accepted course or qualification for business valuers in Australia.So when looking for a business valuer you need to compare each valuer on their merits. It’s the skills, experience and integrity that really matter. You can’t assume anything and things aren’t always as they first appear.
As a business valuer working as an expert in court cases and other matters every working day, I come across a lot of business valuers, some fantastic and some horribly incompetent. When I think about it, I can sum up the differences by asking the following questions:
- Does the business valuer have university level qualifications in accounting?
- Does the business valuer have post-graduate qualifications in accounting and business analysis?
- Is the business valuer a member of a professional body with a mandatory code of conduct covering ethics and integrity?
- Does the business valuer spend most of their time valuing businesses? Beware that most accountants only do between none and very few formal business valuations in their whole career.
- Does the business valuer use multiple valuation methods depending on the situation. For example, discounted cash flow and capitalisation of earnings?
- Can the business valuer explain the difference between important valuation fundamentals such as EBIT vs EBITDA, EBITDA vs Operating Cashflow, Capitalisation Rates vs Discount Rates, Enterprise Value vs Equity Value, Minority Discounts vs Control Premiums, Operating Assets vs Surplus Assets?
- Does the business valuer investigate non-financial aspects of the business such as marketing, systems etc or do they just load the financials into an excel template or other automated software?
- Does the business valuer clearly show all of their assumptions and thought processes in the business valuation report, not just the raw calculations?
- Can the business valuer explain their outcomes in everyday language and substantiate their opinions if under intense scrutiny.
The Lesson: When looking for a business valuer or gathering multiple quotes don’t assume anything. It’s your responsibility to ensure that the valuer you choose has the skills and experience you need. There is an enormous difference between a business appraisal and a business valuation. Without detailed financial analysis the report probably won’t be worth the paper it’s written on. And price is no guide to quality either. The are some very expensive business valuers going around that probably don’t do a commensurate job in my opinion. Although I am horribly biased of course!
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