Valuation of a business in tough economic times

The current economic climate is putting pressure on the majority of business valuations. However it is not only business conditions, but operating platforms, the following are some factors business owners need to consider to increase maintainable earnings, which ultimately increases value:

  • In particular, the impact of technology on your current operations and future operations, to improve efficiencies and reduce cost; 
  • The lower Australian Dollar potentially impacts value going forward if you either source your supplies from offshore or your current markets are offshore; and
  • Exposure to certain industries may impact on future earnings with the agricultural sector having a bullish outlook however the natural resources sector is bearish, however there is some light at the end of the tunnel.

Given valuations are based on future maintainable earning it is important to consider the above factors and the impact of these going forward in how you position your business for sale. Also embracing technology to lower operational costs and improve efficiencies into the future will hopefully improve future maintainable earnings leading to great value. Consideration may also be given to disposing of non-core unprofitable operations to fund the expansion of more profitable areas of the business.

If you would like to discuss this further please don’t hesitate to contact head of BDO’s M&A team Peter Toll.