Understanding Business Value

What components form a business’ overall value? Let us explain…

Business value is primarily made up of the goodwill in the business, alongside the plant and equipment value and the stock in trade.

Other components of business value include intellectual property, such as patents, trademarks, brands, formulae and recipes!

Business value is a cocktail of all the above ingredients and it is these ingredients which make the profit on which the business value is based.

The profit of the business is usually ‘multiplied’ by an accepted multiple for the industry and based on comparable sales evidence of similar businesses (type, size and industry within the same marketplace).

However, business value is not that simple. It can also be affected by individual strengths and weaknesses associated with the business in question and also macroeconomic forces such as Government policy changes or the Global financial crisis.

Examples of how business value can be affected, take a look at what has happened to the value of insulation businesses in 2009 and 2010. In 2008, the value of insulation businesses was skyrocketing but in 2010 it was plummeting… all due to external influences on a previously stable business sector!

To understand business value, contact the office on (08) 9481 4422. One of our friendly and knowledgeable team will be more than happy to discuss your industry and the potential value of your business.

More about GMO: WA’s preferred business broker 

GMO business brokers offers outstanding buying and selling service in Western Australia. If you are looking to buy or sell a small to medium size business in Perth or elsewhere in Western Australia, you will find a reliable partner in us. At GMO there are 18 business brokers at your service, all with their own specialty. Our track record shows 3500 successful sales so far. If you’re looking into buying a business we strongly recommend to look through our businesses for sale in Perth and beyond. If you are looking into selling a business in WA, please contact us so we can help you to maximize your results.

MORE NEWS STORIES

Words of Wisdom from Sir Michael Caine

"I want the feeling in the whole unit to be one of excitement at our common endeavour." GMO's Director and Co-founder, Graham O'Hehir has recently been reading Sir Michael Caine's autobiography 'Blowing the Bloody Doors Off Read more

Q&A With Thorntons Accountants

Jim Goodwin from GMO and Clinton O’Neill from Thorntons discuss Capital Gains Tax on sale of a business. You should consider these implications as part of your business sale plan.   J.G:      Do I pay tax on Read more

The Forecast For Perth’s Retail Sector

According to a recent publication by Ray White, the future of Perth's economy is bright. After what has been a turbulent time in WA business and real estate, especially with the increase of online shopping affecting Read more