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Valuation of a Business

The valuation of a business is an exacting task. It is unlike an appraisal by a business broker where he conducts an appraisal of a business and which is an educated estimation of what a business may sell for on the business sales marketplace. The valuation of a business is a more thorough documented opinion of value, rather than of price. Some experts and accountants argue that business brokers get a price rather than achieving fair value when they sell a business.

This point is argued by other experts who argue that price and value are one and the same. If the business sells for one million dollars then that is proof of its value they argue !

On any given day the value of BHP and RIO are set by the market and reported by the Australian Stock Exchange.

The fact that BHP may be worth $80 billion today and only $75 billion in two days time is a great variation in value and one may ask which market value is right and which market value is wrong?

One answer is that both values are right...because the market is always right..it simply changes its mind from day to day ! Another answer is that the market is often wrong and a clever investor ignores the market price each day and instead analyses businesses to find value where the market does not appreciate it and has not priced that value into the share price.

These clever investors are known as "value investors" and their most famous example and philosophical leader is the American investor Mr Warren Buffett.

So what can we learn from Warren Buffett when conducting a valuation of a business, particularly a valuation of a small business? Firstly, we should study the business carefully. Secondly we may find value which we did not expect to find in the valuation of a business. Third, we may find unexpected problems and weaknesses in the valuation of a business.

The more we look , the more we understand about the business being valued.

This why you should invest in a valuation of a business prepared by an associate of the Business Valuer Network.

Contact Business Valuer Network national co-ordinator Graham O'Hehir on 13000634588  about the valuation of a Business... if you understand why a valuation is greatly superior to a casual appraisal of a business.