Valuation
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Valuation
Business/ share valuation is an art, rather than science. Not with standing that valuation follows long-established principles, be very wary of websites or software that generates a valuation mathematically; there host of other factors that can affect a valuation. Valuations are required not only corporate transactions, but also for a variety of tax reasons.
The principle, but by no means not the only, approaches to valuation are:
- Cashflow – Determines value by reference to future cashflows (and therefore returns on investment) against a desired rate of return. In practice smaller companies do not have cashflow forecasts.
- Earnings – Historical profits are used as an approximation of future potential returns. A multiple is applied to these to determine value. The multiple is subjective but dependent on a wide variety of factors including the size of the business, the industry sector.
- Net Assets – This approach is particularly applicable to asset-rich businesses (e.g. property companies). Assets are re-valued to market value.
In practice, most small and medium-sized businesses are valued on a earnings and net assets. Discounts will apply for anything but a 100% holding/ ownership.
Ultimately a business is only worth what someone is prepared to pay for it and any valuation will potentially be subject to negotiation with a prospective purchaser/ vendor or HM Revenue & Customs, depending on the purpose of the valuation.
Services
Valuation
Business/ share valuation is an art, rather than science. Not with standing that valuation follows long-established principles, be very wary of websites or software that generates a valuation mathematically; there host of other factors that can affect a valuation. Valuations are required not only corporate transactions, but also for a variety of tax reasons.
The principle, but by no means not the only, approaches to valuation are:
- Cashflow – Determines value by reference to future cashflows (and therefore returns on investment) against a desired rate of return. In practice smaller companies do not have cashflow forecasts.
- Earnings – Historical profits are used as an approximation of future potential returns. A multiple is applied to these to determine value. The multiple is subjective but dependent on a wide variety of factors including the size of the business, the industry sector.
- Net Assets – This approach is particularly applicable to asset-rich businesses (e.g. property companies). Assets are re-valued to market value.
In practice, most small and medium-sized businesses are valued on a earnings and net assets. Discounts will apply for anything but a 100% holding/ ownership.
Ultimately a business is only worth what someone is prepared to pay for it and any valuation will potentially be subject to negotiation with a prospective purchaser/ vendor or HM Revenue & Customs, depending on the purpose of the valuation.
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TopCashback
We have used Citrus Group since the early days of establishing our business (6 years) for Audit, Payroll Processing, Taxation and Business Advice and have always found their advice to be responsive and commercial. As well as being professional, the team at Citrus Group are very down to earth, friendly and approachable so you never shy away from picking up the phone to ask for some quick advice - but this doesn’t detract from their ability to grasp complex matters quickly, even under pressurised situations and to deliver sensible pragmatic advice.
Edmonds Accounting Services Ltd
Thank you for the assistance provided particularly in relation to the transition from UK GAAP to FRS102 and for enabling us to submit the accounts within the prescribed time frame. As discussed during our work, the rationale behind much of the transition adjustments was unclear and your assistance, which we are aware was often provided outside normal office hours, proved invaluable and was very much appreciated.
Cross Rhythm
Citrus Group have audited Cross Rhythms charitable accounts for the last 6 years. Their work is of a high standard. They are both professional and friendly in their approach. I’ve also found their fees to be very reasonable.
Hylands Ltd
Citrus Group have looked after all our accountancy needs in a very professional and dependable manner for the last 25 years. They are also a source of sound business advice and provide full payroll facilities which we have been pleased to use for many years. In conclusion we have no hesitation in recommending Citrus Group to any potential client.