Why Business Valuation Matters
If one or both parties own a business, it must be valued for property settlement. This can be one of the most complex and contested aspects.
Valuation Methods
Asset-Based Valuation
What it is: Value of business assets minus liabilities.
Best for:
Capitalised Earnings
What it is: Value based on sustainable earnings and a capitalisation rate.
Formula: Maintainable Earnings × Capitalisation Multiple
Best for:
Discounted Cash Flow
What it is: Present value of projected future cash flows.
Best for:
Market Approach
What it is: Comparison with similar businesses that have sold.
Best for:
Key Concepts
Goodwill
The value above tangible assets:
Personal goodwill is often harder to transfer and may be valued differently.
Maintainable Earnings
What the business can reasonably be expected to earn going forward, after:
Getting a Valuation
DIY Assessment
For simple businesses, parties may agree on a value. Risky but possible.
Single Expert
Both parties appoint one valuer. Cost-effective but risky if you disagree with their conclusion.
Competing Valuations
Each party gets their own valuation. Common in contested matters. Court decides which is more credible.
Forensic Accountant
For complex businesses:
Common Issues
Owner/Operator Businesses
- Business depends on one person
Cash Businesses
- Reported income may not reflect reality
Corporate Structures
- Multiple entities
What Happens to the Business?
Options
1. One party buys out the other - Most common
Practical Considerations
- Can the business fund a buyout?