Why it is important to know the value of your business

A properly considered business valuation can be the first step in many essential business processes and activities. Although there are many examples, these might include procurement of a buy and sell policy or facilitation of a business restructuring process, for instance.

Initiating negotiations during a sale of business transaction, probably remains the most common business valuation trigger however, and for many business owners, such event might be the first and only time the thought of having a business valuation performed will occur.

Business valuations are therefore often treated as the end, rather than the means to an end.

Growing a successful business requires an enormous time investment. When doing it right, this investment is justified however, since no other investment has the potential to reward your time investment over the long-term, better than a successful business. For this reason, we have always found it peculiar when business owners are willing to wait until just before sale before deeming it important to quantify the value of their plans, time (often years), efforts, etc.

This is probably where the value of proper valuation is mostly overlooked – we tend to view valuation as the end while it should maybe rather be viewed as a guiding key performance indicator on the journey to comfortable retirement or eventual exit from a business, regardless of what the reason for exit might be. Valuations should be the means to an end, employed to help inform decision making and strategic process, not when you are ready to sell, but rather while it is still possible to make positive adjustments to your business.

In this context, we generally advise that a business valuation be performed at least on an annual basis, even if only employed in internal processes, as a key performance indicator. By taking this approach, performance and growth can be measured periodically while the necessary strategic and operational adjustments can be made while there is still time to build value through good and prudent business decisions.

Having said this, it is important to note that the value of a valuation is limited to the quality of its interpretation and application. It is important that a valuation instructs focussed action, and it is therefore always a good idea to involve a trusted and experienced financial advisor in your strategic, as well as financial processes.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)




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IC Marais

Professional experience:

IC Marais is a certified CA (SA) with public sector and private sector technical knowledge based on 5 years’ Public Sector accounting, auditing and financial management experience and 5 years audit, tax and accounting experience. Detailed knowledge of private and public sector accounting and auditing standards (GRAP, IPSAS, IFRS, IAS, ISA) and public sector financial legislation (MFMA, etc.)

He enjoys the outdoors, hunting and fishing.



Professional experience:

In 1995, Schalk started as a trainee at Warner and Newton (which became Moores Rowland in 1997 and then Mazars Moores Rowland in 2007) in Bloemfontein. In 1998, Schalk was appointed as manager at Moores Rowland, where he became a partner in 2003. Schalk received his Postgraduate Certificate in Advanced Taxation in 2006 and in 2009 he received his Certificate in the Administration of Estates.



Professional experience:

Cedric started as a trainee at Warner and Newton (which became Moores Rowland in 1997 and Mazars Moores Rowland in 2007), Bloemfontein, in 1986. After completion of his articles, he joined the Special Investigations Division of the Department of Finance (SA Revenue Services) as a senior inspector from 1990 to 1991.



Professional experience:

Lucha started her career as a tax inspector at the Inland Revenue Department of New Zealand. After this she worked in commerce in Canada, Mexico and the United States.

On her return to South Africa, she completed her CA training contract with us and has been with Newtons ever since. She became a Partner in 2012.

Apart from her CA(SA) qualification she also holds a postgraduate certificate in Advanced Taxation (2005) and has the overall responsibility for training as our Training Officer.