This is one of the most frequently asked questions we receive
Typically, a business appraisal involves analysing the three primary elements that make up the sale price.
- fixed assets including plant and equipment
- goodwill
- valuation of stock
Plant and Equipment/Assets –this is the equipment used in operating the business, this component covers everything you plan to sell with your business, from large items of machinery and vehicles to office furniture and air conditioning.
Goodwill – the intangible value of a business such as its reputation, branding, customer loyalty, intellectual property and other value that makes the business. It is what makes the purchase price of a business higher than just the fair market value of all its assets. The goodwill factor is usually based on a multiple of genuine profit above and beyond an owner’s wage.
Stock at valuation (SAV) –this refers to the price or value placed on stock held at that business at a given time. The stock value or amount is determined just prior to the sale of the business, usually 24-48 hours prior to settlement. Once the stock value has been determined the final sum that the purchaser is required to pay to the seller for the business will be adjusted accordingly, that being asking price + SAV.
