Home > Updates > Business Valuation Guide | When, why and how to value your business
A well‑prepared business valuation does far more than put a number on a company. For many small and medium‑sized businesses in New Zealand, it becomes a practical tool for planning ownership changes, guiding strategic decisions, and improving value long term. When business owners engage early with their accountant, the valuation process becomes clearer, smoother, and far more useful. Being proactive well ahead of any transaction taking place, often reveals opportunities to lift performance and reduce risk.
A valuation measures the economic value of a business at a point in time by analysing its financial performance, risks, industry conditions and future earning potential.
While every business is different, most valuations will consider:
While many business owners think a valuation isn’t needed until a transaction is underway, if left until that late stage, options to influence the outcome are limited. Engaging early with an accountant can provide many benefits, helping you get the most out of a sale transaction:
An accountant who understands the business can guide owners through the process, explain the valuation methodologies, and help business owners prepare for the items that will have the most impact on value.
A valuation is powerful when it becomes part of a long-term planning conversation, rather than a last-minute requirement. Understanding value early helps guide succession planning, supports fair shareholder transactions, and allows business owners to strengthen their position for future opportunities. With the right preparation and advice, owners can significantly influence many of the factors that drive value.
To help answer common questions about business valuations we have included some FAQs below. If you have a question that’s not covered, please get in touch with us.
Chartered Accountants with valuation experience, valuation specialists, and business brokers are best placed to provide a business valuation. Valuations should be completed by competent professionals with valuation experience to ensure the results are accurate and backed by evidence.
Industry multiples are valuation ratios used to help provide a benchmark for comparison to similar businesses. Multiples are a reflection of the rate of return expected by a purchaser, and will generally be higher in more stable industries and in businesses with consistent trading history.
A business’ value is dependent on a few factors including industry risk, the reliability of future income, what tangible assets are included in the valuation, and recent sales of similar businesses. Some of these factors can be influenced prior to sale which is why succession planning is important to maximise business value in the years leading up to a sale transaction.
Tangible assets are the physical assets that are required to operate a business and will depend on the needs of the business i.e. machinery, vehicles, and computer equipment.
Intangible assets are the asset you own that don’t have a physical form. This could be trademarks, intellectual property, copyrights and goodwill.
Valuations are not something that can be whipped up overnight. Calculations, research and third-party information is required to complete a valuation, so a few weeks are generally required. If you think you need a business valuation done, it is best to engage with a specialist early to confirm required timeframes.
The cost of a valuation will depend on the detail required, the size of the business and the purpose of the valuation. Where Nexia are providing a valuation, we will provide an estimate of costs and have engagement documents in place prior to commencing.
If you’d like to book a consultation with a business valuation specialist based in Auckland, Christchurch or Hawke’s Bay, contact a Nexia advisor. We’d love to discuss how a valuation could help your succession planning and ensure you get the most out of your business, whether you are exiting, or bringing the next leaders through to ownership.
Nexia New Zealand is one of New Zealand’s leading full-service chartered accounting and business advisory consultancy firms, offering the full range of chartered accounting, business advisory, corporate advisory, tax, audit services.
Nexia New Zealand has four offices throughout New Zealand: Victoria Street in Christchurch, Albany on Auckland’s North Shore, Newmarket in the Auckland CBD and Hastings in Hawke’s Bay.
Reach out to one of our trusted Nexia Advisors. We have offices in Christchurch, Auckland and Hastings.
