28/05/2026
There are many factors that contribute to the valuation of a business. It is not a process that can be entirely entrusted to software as the nuances involved cannot be properly captured by even the best valuation programs.
One of the most important considerations is always solvency. This is a measure of the business's ability to meet its financial obligations on an ongoing basis. An insolvent business has a very different value profile to one that is solvent and properly formed future expectations about solvency have significant impacts on valuation outcomes.
Another important factor is business risk. This is generally reflected as the timeframe in which a purchaser seeks to recover the investment made in acquiring the business. The lower the risk, the longer the recovery period (and the greater the value).
A business risk profile will be affected by factors such as the profitability and productivity of the business, the size and dynamic nature of the market, and the growth potential of the business considering competitive factors, among many others.
When all of these factors are taken into account, it is possible to estimate a business's risk profile and, where appropriate, through the application of that risk factor to predictable forward profits, a value.
However, it is important to remember that this is only an 'educated guess' - a true value will often also incorporate intrinsic factors that escape traditional valuation methods, resulting in an 'actual' or 'true' value that may be different from the calculated outcome.
At Beacon Advisory, we have the experience and expertise to help you understand all of the different aspects that can affect not only value but a transactional actual or notional sale price.
As always, please don't hesitate to reach out to us for help. We would be happy to assist you in any way we can!