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Valuing a business

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Valuing a business

BUSINESS VALUATIONS

How much should I pay for the business which I wish to acquire?

What price should I acceptfor my business? What is the value of my business?

In any acquisition, disposal, part disposal, merger, investing of capital or passing on a business to another party some or all of the above questions will have to be addressed.

The answer to the above questions is of course subjective and depending on whether you are acquiring, selling, investing, passing on or inheriting a business you will have a different idea of value.

How do you value a business?

Utilising a number of quantitative business valuation techniques and focusing on a range of basic value drivers such as those set out below will assist in determining the value of a business.

Quantitative Methods?

1) Comparison of the company to public company market values

2) Comparison to the sales prices achieved for similar types of businesses in recent transactions

3) Discounted Future Cash Flows expected from the business

4) Determine the net proceeds which would be obtained from the (break up) disposal of assets of the company and the satisfaction of all the companies' liabilities.

5) Recognise non-operating assets such as surplus cash or property as these assets may add additional value to the business and should be considered separately.

Value Drivers

1) Trends in turnover of the business and market share

2) Operating Margins achieved by the business in comparison to your competitors

3) Trends in free cash flow

4) Level of investment - under invested businesses attract a discount while an over invested business does not always attract a premium.

6) Consistency of performance Management team. How critical to delivering the value drivers above? Are they staying or going? How can management be retained?

7) Staff - Are they critical to the business? If so how mobile are they?

8) Business size?

9) Level of competition in the market and the outlook for the market.

10) Technology capability and how technology will impact on the business in the future?

11) Tax?

12) Is the industry in an attractive industry sector?

13) Number of potential trade and financial buyers?

14) General Economic conditions?

BUSINESS VALUATIONS

When should I value my business?

The owners of businesses which look at their value on a regular basis are able to

identify factors which are impacting on value and need to be addressed. They are also

able to identify opportunities to enhance the value of the business. They are also

assisted in identifying the optimum time to exit which may be today or at a later date

because the overall value derived from the business is likely to be enhanced by continuing to work on the business.

Successful acquisitions, disposals and investments require realistic business valuations. Valuations should focus on all internal and external commercial issues relevant to the business.

Valuations are utilised to assist in carrying out negotiations to acquire or invest in businesses and how to maximise the value of their existing businesses. By monitoring performance and the dynamics of the markets they operate in, business can quickly re evaluated with a view to ensuring our clients exit the business at the optimum time.

Check out ... exit plan have you got one?

 

 




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Testimonials

"I run my own business and after years of struggling with a demanding home life and a hectic work schedule I reached a situation whereby I was functioning poorly with both. I’d missed a couple of VAT payments and had intended to catch up at the end of the year. I missed my own deadlines and tried again to catch-up in the following year. Business became a stressful job of ‘fire-fighting’ each day’s demands, eventually pushing the issue of outstanding taxes out of my mind as much as possible, in order to concentrate on work.

That said, you always know in the back of your mind that these things don’t just go away and that it was just a matter of time before ‘they’ catch up with you. 

After a few years of letting my compliance payments slide altogether, the Revenue made contact with me and gave me an estimate of all PAYE, VAT and tax owed over the years – which ran to over 6 figures- and they wanted the money immediately. I knew I was in big trouble and looked in the Golden pages for an accountant who could help me. The name www.fixmytax.com jumped out of the page and I made contact. I was immediately reassured that they could help me. I was asked for “every bit of paper” concerning the office and all old Revenue correspondence.

The first thing fixmytax.com was to do was make contact with the Revenue on my behalf and assure them that they were handling the situation and that the liabilities were being established, even though it would take time. That took the immediate ‘knock-at-the-door’ shock and worry out of the situation. The coming weeks were spent only dealing with fixmytax, (not the Revenue) answering the odd question by phone and filling in more information for the accountant. Even though this was routine information, I was quite reassured by the fact that they were working on the whole Revenue mess and actually sorting through it for me. This took the panic and stress out of the situation and enabled me to concentrate on work. After a few weeks, accounts and figures had been prepared, which I went over with the accountant.

The accountant had dealt with the Revenue directly on my behalf and he saved over 60% off the original tax bill.

Throughout the process, the fixmytax accountant was hugely supportive to me, dealt directly with the Revenue, reduced the original tax bill considerably and most importantly, had taken the fear out of the situation and given me peace of mind knowing that good progress was being made with the Revenue, rather than hiding from it all.

The cost? Approximately 7% of the money SAVED on the original tax bill!

My Revenue mess caused me huge amounts of anxiety all the time I did nothing to resolve it. In dealing with fixmytax, they took control of the situation and proceeded to do what had to be done. I would not hesitate to recommend them to anyone worried about any aspect of taxation and financial planning for a business.

I now have a good relationship with the Revenue, fixmytax looks after not only the basics of compliance, but also the financial planning and regularly reviews the performance of the business. My business is now stronger and more focussed that ever before simply because of the level of ongoing collaboration and support that I have with fixmytax. They are the proverbial “good accountant” that every business needs.

My most valuable lesson in dealing with fixmytax is that it is far more productive and far less stressful to get a good supportive accountant to do what they do best, leaving me free to do business. Thanks, Patrick!

Satisfied Client, name and address with firm. 

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