By HM Team – Chester, Liverpool, Birkenhead
You may find yourself in a situation where you require a business valuation, for which there are many types. From a standard business valuation and property valuation, to a matrimonial valuation, a business valuation is essential in a variety of transactions and disputes.
A business valuation aims to calculate the market value of a business or business assets, such as property. A qualified business valuer will value a business to work out how much it’s worth using comparable sales data, for example, how much similar businesses were valued and subsequently sold for, along with using other ways to value a business.
In this blog, guest writer Paul Williamson from Selling My Business runs through the five types of available business valuations and situations where you would need one.
What types of business valuations are available?
1. Standard business valuation
A standard business valuation consists of a review of goodwill, fixtures, fittings, plant, machinery and equipment. It looks at key components that contribute to making a business including:
- industrial machinery (such as an excavator to help create the foundations of a property)
- interior fixtures (that could be a takeaway counter to serve food-to-go)
- fittings (such as an in-built freezer room to preserve fresh ingredients).
A standard business valuation may be required if the business owner wishes to sell the business. As a starting point, a business valuation calculates how much it’s worth and will establish a suitable sale price.
2. Probate valuation
A probate valuation is similar to a standard business valuation in the way that it considers every component that makes the business tick. The difference is that it calculates the market value of the business up to a point in time, rather than the date of the business valuation.
A probate valuation takes place after a business owner dies, and calculates the worth of their assets, including their business. It considers how much the business can be sold for at the time of the owner’s death.
3. Matrimonial valuation
A matrimonial valuation is a standard business valuation, although the duty of care is not to either party in the dispute, but to the court. The purpose of a matrimonial valuation is to value how much assets are worth so they can be distributed between the parties involved in divorce proceedings.
4. Property valuation
A property valuation is a valuation that is focused on a particular property. This is sometimes produced as an individual report, or as part of a business valuation. A property valuation notes what factors affect the value of a property, such as property use, size, location, condition, and fittings. A property valuation may be performed if a property owner wishes to sell a property separate from the business.
5. Investment property valuation
An investment property valuation is a variation of a property valuation when a property is let on a lease. The valuation of an investment property will include an assessment of the potential income the property can generate, and the characteristics of the property (as with a standard property valuation).
When the time comes and you need legal advice, talk to us about:
- buying or selling a business, including shareholder agreements
- buying or selling commercial and residential property
- matrimonial queries including divorce and separation, and children’s arrangements
- wills and probate, including protecting business and family assets.
Ask for a call back: Hello@HM3Legal.co.uk
What to do next?
A RICS registered valuer follows the RICS Red Book which sets out global valuation standards, and can carry out a range of business valuations. If you’re unsure about which valuer is right for you, speak to an experienced and highly qualified business valuer.