Business Valuations for Succession Planning
An independent valuation gives an owner planning a handover a documented value to plan around, whether the successor is family, staff or an outside buyer.
Why an independent valuation
Succession in a trade business is hard to plan without a figure. The owner wants a retirement that is funded, the successor wants a price they can afford, and any family members outside the business want to see it handled fairly. A valuation gives everyone the same starting number, with the reasoning behind it.
It also shows how the business looks without the owner. Owner dependency, meaning the owner’s licence, relationships and hours, is the most common reason a trade business is worth less to a successor than the owner expects. A valuation puts a number on that gap, which can then be narrowed over time by delegating, documenting and building the team.
Handovers are often gradual: a first tranche of shares, a later buy-out, finance from the vendor. Each step needs a value at its own date, and the earlier valuations become a record of how the business has changed.
When owners and advisers ask for one
- An owner within a few years of retirement who wants to know what the business is worth and what would improve it
- A son or daughter who has worked in the business and will take it over, where the parents want a price that is fair to everyone
- A buy-in or buy-out by a long-serving leading hand, supervisor or operations manager
- An owner transferring shares in stages over several years and needing a value at each stage
- Several children, only one of whom works in the business, where the owner wants to treat all of them fairly
- An owner who has not decided between family succession, a sale to staff and a sale to a third party and wants to compare them
- A business where the owner holds the only licence and wants to understand how that affects value before training a successor
What the valuation needs to address
Settled in the engagement letter before work starts, so the report answers the question it is being used for.
Owner dependency
We deduct a market cost for the work the owner does, then consider how much of the revenue, licence cover and customer loyalty depends on them personally. In a succession valuation this is usually the largest single factor.
Transferability to the successor
Does the successor hold the licences the work requires? Do the key customers, suppliers and staff know them? Can the contracts be assigned? We assess what a successor, not only an arm’s length buyer, would realistically keep, and we state our assumptions.
Standard of value
Market value is the price a willing buyer and a willing seller would agree, and it is the usual basis for a handover to family or staff. If the parties want to price differently, for example with vendor finance or a family arrangement, that is a commercial decision for them, and we can show market value for comparison.
Valuation dates over time
Where a handover happens in stages, each stage may need a value at its own date. We confirm the dates at the start, and an additional historical valuation date is from $495 + GST where the engagement permits it.
Entity and assets
The trading entity, the property, the plant and the intellectual property may be held separately, perhaps in a family trust or a superannuation fund. We confirm what is included in the business being passed on and what the owner is keeping.
Who relies on the report
The owner, the successor, family members and their advisers may all read the report. We name them in the engagement so everyone knows what the valuation was prepared for, and where more than one person is asking, who we are acting for.
How it runs
Succession usually involves the owner, the successor and their advisers. We confirm in writing the entity being valued, the date, the purpose and who will rely on the report before work starts. Intake starts online at /start, and documents are uploaded through the secure client portal.
A draft report is provided before the report is finalised, so the owner and the successor can check the facts and ask questions. Typical turnaround is 3 to 7 business days once all required information has been received. That is typical rather than promised, and complex matters can take longer.
The Independent Business Valuation is a fixed fee of $1,995 + GST. A business with several entities, divisions, unusual ownership or heavy customer concentration is a complex valuation, quoted in writing from $2,995 + GST before work starts. See pricing.
- Tell us about the business. Complete a short valuation intake.
- Upload your information. Financial statements and supporting information are securely uploaded through the client portal.
- We analyse the business. We review earnings, operating structure, industry characteristics, risks, assets and transferable goodwill.
- Valuation prepared. Appropriate valuation methodologies are applied and the evidence is documented.
- Draft and final report. You receive a draft before the report is finalised.
Important
A valuation is not a succession plan. We do not give legal, tax or financial advice, and the structure, price, timing and finance of a handover are decisions for the owner with their accountant, lawyer and financial adviser.
Information on this website is general in nature and does not constitute legal, taxation or financial advice. The appropriate valuation approach depends on the circumstances and purpose of each engagement.
Common questions
How early should I value my business before handing it over?
Early enough to act on what the valuation finds, which for most trade businesses means well before the planned handover. Owner dependency, licence cover and customer concentration take time to improve, and a valuation shows which of them matter most in your business.
Can my successor pay less than market value?
That is a commercial decision, and often a tax and legal one, for you and your advisers. A valuation gives an opinion of market value, and you can then decide how the actual price relates to it. We do not advise on price, tax or family arrangements.
Does a valuation help if the business depends on me?
Yes, because it shows how much of the value depends on you and why. It will not make that dependence disappear, but it identifies which parts, such as licences, quoting, supervision or key accounts, are worth addressing first. Our article on valuing a business with owner dependency explains the issue.
Can you value a business being handed to staff or family?
Yes. The approach is the same as for any other buyer, with extra attention to what the successor would realistically keep and whether the owner’s role can be replaced. The report sets out its basis clearly, because family members and staff often want to see how the figure was reached.
Related
Start with a short intake. We confirm the fee and scope in writing.
An Independent Business Valuation is $1,995 + GST, with a draft before the report is finalised. Typical turnaround is 3 to 7 business days once all required information has been received.