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Business valuation guide: start with the purpose
A sale, ownership transfer, shareholder discussion and planning exercise can ask different questions. Specify the business or shareholding, valuation date, intended use and who will rely on the work. A value conclusion is tied to those instructions. If you need a professional assessment, our independent business valuation service is the place to start.
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Prepare the information
Gather historical accounts, current management results, forecasts, debt and cash details, asset records and customer information. Explain changes in products, staffing and trading conditions. The valuation preparation guide gives a practical starting point. Good records help distinguish sustainable performance from a temporary high or low.
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Understand the business behind the numbers
Assess customer reliance, owner involvement, contracts, capacity and the quality of financial information. A customer concentration ratio is one indicator, not a complete risk assessment. EBITDA adjustments should be evidenced in both directions, including costs a new owner would need to replace. Reported earnings and future cash generation are related but different.
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Choose and test valuation methods
Income, market and asset approaches answer value questions in different ways. Our valuation methods guide compares them. A discounted cash flow valuation tests future cash flows and risk; valuation multiples require a compatible earnings measure and genuinely comparable evidence. A method should fit the business and purpose, rather than produce a preferred number.
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Move from business value to ownership value
Check whether the conclusion describes the operating business or the equity. Cash, debt and other agreed items can affect the bridge between enterprise value and equity value. For an owner-operated business, understand how seller's discretionary earnings treats the owner's work. None of these measures automatically equals the seller's personal net proceeds.
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Read the report and use the result
A useful report explains its scope, information, methods, assumptions and limitations. Use our valuation report contents guide to organise your questions. Consider how a change in an important assumption affects the conclusion. Value informs negotiation; the price and payment terms still depend on the parties and the transaction. We can help you connect the findings with your next ownership decision.
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Explore the topic
- Appraisal vs valuation: choose the right business assessmentA business appraisal and a business valuation can serve different purposes.
- Business valuation: what to prepareA useful business valuation starts with a clear question. Before a sale, shareholder change or succession discussion, organise the evidence and agree what the valuation needs to inform.
- DCF valuation: test forecasts, discount rates and growthDiscounted cash flow valuation examines future cash and what it is worth today.
- Independent business valuation in New ZealandAn independent business valuation gives an ownership decision a clear starting point.
- Can revenue alone tell you what a business is worth?Revenue shows the scale of a business's sales, but it does not show what those sales cost to deliver or how much cash remains.
- Valuation costs: compare the scope before the feeThe cost of a business valuation depends on the work it needs to do.
- Compare methods for valuing a businessBusiness valuation methods examine value through different lenses: future income, market comparisons and assets.
- Valuation multiples: test the earnings and the comparisonA business valuation multiplier is meaningful only when you understand the earnings it applies to and the comparison behind it.
- Business valuation report template: a practical owner's outlineA business valuation report template helps an owner ask for a clear explanation, not just a headline number.
- EBITDA adjustmentsEBITDA adjustments explained with a worked earnings bridge, evidence checklist and common add-back mistakes. Discuss your business with Pivot Point.
- Customer concentration ratioCalculate your customer concentration ratio and test the effect of losing a major account. Use the worked example and discuss the risk with us.
- EBITDA vs net profitCompare EBITDA vs profit with formulas, a worked example and the costs each measure includes. Discuss your business performance with Pivot Point.
- Sellers discretionary earningsUnderstand sellers discretionary earnings with a worked SDE calculation, owner-pay adjustments and an EBITDA comparison. Discuss your valuation.
- Enterprise value vs equity valueEnterprise value vs equity value: follow the bridge, use a worked example and test cash and debt adjustments. Discuss your valuation with us.
- Business goodwill valuationUnderstand business goodwill valuation, commercial value and acquisition accounting, with a worked example. Discuss your business valuation with us.
Your next move
Discuss your valuation purpose
Tell us what the valuation needs to support, who will use it and your timing. We can clarify the work required and the information to prepare.
Discuss your valuation purpose