Businesses, practices and ownership interests of most kinds

A private company is valued as a whole, and then the shares actually held are valued, which may differ where the holding is less than the whole or the constitution and any shareholder agreement restrict transfer or control. Loans between the company and its shareholders, retained profits and franking credits are identified and treated consistently. The report explains the movement from enterprise value to equity value and then to the value of the shareholding.

The business and its owner are the same legal person, so the question is what, if anything, could be sold to someone else. Earnings are adjusted for the owner's own labour at a commercial rate, and the analysis of goodwill focuses on how far customers, referrers and contracts would follow a new owner. Many sole-trader businesses hold most of their value in the owner's hands rather than in a transferable asset.

A partner's interest is valued with reference to the partnership agreement: the share of profit, the share of capital and the terms on which a partner can leave or be bought out. Where the agreement fixes an exit price, the report considers whether that price reflects market value or something else. Partner drawings, salaries and capital accounts are reconciled before the earnings are assessed.

Where a business is run through a discretionary or unit trust, the interest being valued has to be identified carefully, because a beneficiary of a discretionary trust may have no fixed entitlement at all. The valuer reads the deed, identifies the trustee, the appointor and the beneficiaries, and considers control as well as entitlement. How the trust is treated in the property pool is a legal question; the report provides the value and explains the structure so that question can be addressed.

Accounting, legal, engineering, architectural and similar practices earn from the skills and relationships of their principals, so the analysis of goodwill and owner dependence is central. Fee base, client concentration, staff leverage and the terms on which principals can leave are examined. The valuer distinguishes the earnings the practice would produce for a purchaser from the earnings that reflect the principal's own work.

Registrations, provider numbers and referral relationships typically attach to the practitioner rather than to the practice, which affects what a purchaser could acquire. The valuer looks at the billing model, practitioner contracts, patient and referrer concentration, premises and the owner's clinical hours. Where the practitioner-owner generates most of the fees, the value of the practice as a business may be modest even where the income is substantial.

Registration, participant plans and workforce arrangements determine how durable the revenue is. The valuer examines participant numbers and concentration, plan funding and renewal, the workforce model, compliance history and how much of the operation could run without the owner. Rapid growth is common in this sector and is tested rather than assumed to continue.

Value depends on traffic sources, platform dependence, margins after advertising and fulfilment costs, stock, and whether the brand, domain and customer data can be transferred cleanly. The valuer looks for concentration on a single marketplace or advertising channel and for how much of the operation is systemised rather than run personally by the owner. Growth is assessed against the cost of achieving it.

Work in progress, retentions, licensing and the owner's role, on the tools or in winning work, are the usual questions. The valuer considers whether licences and accreditations are held by the business or by the owner personally, how contracts are won and how dependent the business is on a few builders or customers. Plant and vehicles are identified and treated separately from goodwill.

Cleaning, consulting, marketing, IT, hospitality, transport and other service businesses are valued on the earnings they can maintain after paying for the owner's own labour at a commercial rate. Customer contracts, staff, systems and the reasons customers stay are examined to assess how much of the business would transfer to a purchaser. Seasonality and recent changes in trading are considered when identifying maintainable earnings.

A minority interest does not carry control of the company, its distributions or its sale, and its value depends on the rights attached to it under the constitution, any shareholder agreement and the conduct of the majority. The valuer considers the holder's actual position rather than a simple share of the whole. Where the shareholding is in a family company controlled by one party, the report explains how that affects the analysis.

Many businesses are run through a group: a trading company, a trust that owns the premises, a service entity that employs the staff, and loans between them. The valuer maps the group, identifies the interest held in each entity, reconciles the transactions between them and values the interests consistently so that nothing is counted twice or missed. The report presents the structure clearly so advisers can see how each entity contributes to the whole.