What Are the Steps in a Business Valuation?
A business valuation follows six key steps: (1) define the purpose and scope, (2) gather financial documents and business information, (3) normalise financial statements, (4) select and apply appropriate valuation methodologies, (5) reconcile results and form a value conclusion, and (6) deliver a comprehensive written report.
Step 1: Define the Purpose and Scope
Every valuation begins by clearly defining why the valuation is needed. The purpose directly influences the methodology, the standard of value applied, and the level of detail required in the final report.
Common purposes include business sale, tax compliance, legal proceedings, financial reporting, succession planning, and strategic decision-making. Your valuer will also establish the valuation date, the entity being valued, and any specific assumptions or limiting conditions.
Step 2: Gather Financial Documents and Business Information
You will need to provide three years of financial statements (profit and loss, balance sheets), tax returns, BAS statements, an asset register, details of any leases or key contracts, and an overview of your business operations and market position.
Your valuer will supply a detailed checklist tailored to your business. The more comprehensive and organised your documentation, the smoother and faster the valuation process will be. Our secure document portal makes submission simple.
Step 3: Normalise Financial Statements
Normalisation is one of the most critical steps. Your valuer adjusts the financial statements to remove items that don't reflect the ongoing economic reality of the business — owner's personal expenses run through the business, one-off revenue or costs, above or below-market salaries, and non-arm's-length transactions.
The result is a set of normalised earnings that represent what a hypothetical buyer could expect to earn. This normalised figure is the foundation for earnings-based valuation methodologies.
Step 4: Select and Apply Valuation Methodologies
Based on your business type, industry, and the purpose of the valuation, your valuer selects the most appropriate methodology or combination of methodologies. The three broad categories are income-based (e.g., capitalisation of future maintainable earnings, DCF), market-based (comparable sales and transaction multiples), and asset-based (net asset value).
In most cases, a primary methodology is selected and one or more cross-check methods are applied. This triangulation approach increases confidence in the final value conclusion.
Step 5: Reconcile Results and Form a Value Conclusion
When multiple methods produce different values (as they often do), the valuer reconciles these results by considering the relative reliability of each method, the quality of available data, and the specific characteristics of the business.
The valuer then forms a final value conclusion, which may be expressed as a single point value or a range. The reasoning behind this conclusion is thoroughly documented in the report.
Step 6: Report Delivery and Review
You receive a comprehensive written report that includes an executive summary, detailed methodology explanations, financial analysis, normalisation adjustments, value conclusion, and supporting appendices. A draft is provided for factual review before the final report is issued.
Your valuer will walk you through the findings and answer any questions. If the report is needed for a specific purpose (court, ATO, bank), the valuer ensures it meets all relevant standards and requirements.
Key Benefits
How It Works
1Scope & Quote
Define the purpose, establish the scope, and receive a clear fixed-fee quote before any work begins.
2Document Collection
Upload your financial documents via our secure portal using our comprehensive checklist.
3Analysis & Valuation
Our valuers normalise your financials, apply appropriate methodologies, and build your valuation model.
4Review & Deliver
Review a draft for factual accuracy, then receive the final comprehensive report with a walkthrough of findings.
Common Questions About Business Valuation
People Also Ask
Financial normalisation is arguably the most critical step. Incorrectly normalised earnings can dramatically skew the final value. This is where experienced valuers add the most value — understanding which adjustments to make and how they affect the true earning capacity of the business.
Learn about income-based valuation →Method selection depends on the business type, data availability, purpose of valuation, and industry norms. Profitable established businesses typically use earnings-based methods; asset-heavy businesses use asset-based; and businesses preparing for sale often use market-based approaches.
View all valuation methods →Yes — organising your financial documents thoroughly before engagement saves time and can reduce costs. Having clean, well-organised records with clear explanations of unusual items helps your valuer work more efficiently.
Start preparing →Related Guides
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