Business Valuation Services

Lotus Amity provides a range of business valuation services. The following are some of the common business valuation services we provide.

Business Valuation Approach

No matter the size of the private business, all out reports adhere to the Australian and International Valuation Standards. Consequently, we consider and apply the three key valuation approaches: Income Approach, Market Approach and Cost Approach.

We adopt a comprehensive and granular approach to valuations. We carry out detailed operational, financial and industry analysis. This includes analysing revenue and profit trend, monthly working capital requirements, customer contracts and pipeline and customer risk.

We carry out this analysis to estimate and model future cash flows and the risk attached to those cash flows to derive an intrinsic value. We then analyse the market pricing information to assess if the market supports our valuation.

Businesses Valued

We value business in a wide range of industries. We are particularly passionate about industries that are focussed on being environmentally sustainable, such as biodiversity and renewable energy. Our industries include:

The size of business that Lotus Amity value range between turnovers of $500,000 to $300 million. Private business valuations may also include the value of intellectual property, goodwill, preference shares, debt and options.

Business Valuations FAQ

What information do you require to prepare a business valuation report?

We provide a standard information request list which you can download here. In addition, each valuation usually requires other specific or unique information. Once we have reviewed the information provided per the information request list, we often have additional questions. All the information received is referenced and incorporated into the appendices of the report.

INFORMATION REQUEST

How does a business valuation report commence?

The business valuation report process begins with instructions from you, your advisors or legal representative. We then prepare an engagement letter for your review. The engagement letter contains:

Business background and background to the engagement
The purposes and scope of the report and compliance with business valuations standards
The basis and premise of value. There are different basis of value, such as Market Value and Investment Value and different premises of value, such as current use or highest and best use.
Information required
Timing and fees
Confidentiality independence and exclusionn

What does a business valuation report look like?

All business valuation reports include financial and operational analysis and valuation modelling. However, the amount of analysis included in the valuation report depends on the rise and complexity of the business. Reports range from 30 pages to 100 pages, plus the appendices which can be up to 1,000 pages.

You can view a sample report contents here. The contents of a business valuation report will often look like this:

Glossary of terms
Executive summary, including conclusion of value, material facts and significant assumptions
Scope and basis of value, including valuation date, relevant valuation definition, tax and transaction costs and valuation standards
Background and operation analysis include product and service overview, customer and supplier analysis, management and staff
Revenue analysis, including annual and monthly revenue trend and revenue by product and or customer
Cost analysis, include gross profit margin analysis and key expense analysis and any normalisations of expenses
Balance sheet analysis, including average working capital requirements, analysis of inventory, fixed assets, cash and debt
Valuation approach explanations and selection of approaches
Cash flow modelling and explanation for choice of future cash flows, often under different scenarios
Discount rate modelling, including cost of equity using a beta and total beta CAPM approach
Market approach application including research and analysis of comparable companies and transactions
Cost approach application, including including analysis of all costs that a participant would incur
Value of the business and adjustments necessary to arrive at value of shares
Conclusion of value and declaration

The appendices include all information provided, public information considered and all calculations. This transparency allows replication of the report.

Sample Business Valuation report contents

How confidential is the information I provide during the valuation process?

As Chartered Accountants we are bound by a strict code of confidentiality. Under the Code of Ethics we will not disclose any information without proper and specific authorisation.

The information provided to us is solely for the purpose of preparing the business valuation report. We maintain secure systems to protect the security and confidentiality of your information.

How do you value a business?

W value a business by following the International Valuation Standards. There are three Valuation Approaches to value a business: Income Approach, Market Approach and Cost Approach.

Income Approach. Using the Income Approach, we estimate and model future cash flows and discount rates. This first requires a granular analysis of the historic financial performance and operations of the business and the outlook for the business and industry.
Market Approach. Using the Market Approach, we research the Thompson Reuters data base to identify public companies and transactions with similarities to the business and infer valuation metrics, for example EBITDA and revenue multiples. We adjust these multiples and then apply them to the business.
Cost Approach. Under the Cost Approach we look at all costs required to replicate or recreate the business assets, including both direct and indirect costs, such as finance costs, installation costs and profit margin.

Find out more here

What business valuation standards do you follow when preparing the report?

All our reports comply with both the Australian Business Valuation standards and the International Valuation Standards

How long does it take to prepare a business valuation report?

For a straightforward report it usually takes 3 to 4 weeks. It takes 1 week to review and analyse the information, 1 to 2 weeks to write the report and we allow 1 week for the external quality review. More complex reports take longer.

How much does a business valuation report cost?

The fees depend on the quantity and quality of the information to review and the complexity of the business and business structure. Fees start from $5,000 plus GST up to $50,000 plus GST.

Factors that determine the fee include:

the purpose of the report, for example, an expert report for court versus an internal report for management purposes
poor financial information that does not reconcile and or information not provided in the requested format
multiple services and revenue streams from different industries
high revenue growth with limited past financial information
complex related party transactions and group structures
financial instruments such as preference shares, convertible notes and options
non business assets, such as joint venture interests and interest in associated
unusual balance sheet items, such as unusually high inventory