How to Choose a Business Valuer in Melbourne: What to Check Before You Engage

Why the choice matters more than it seems

A business valuation is used to make a decision with money attached: a price, a buyout, a tax return, a duty assessment or a settlement. If the other side, the ATO, the SRO or a court does not accept the valuer's reasoning, the report has not done its job, however good the number looked. So the question is not which valuer gives the highest or lowest figure. It is which valuer gives you a figure that will hold up when someone tests it.

The ATO's own guidance makes the point. It says the acceptability of a valuation usually depends on the process followed rather than on who prepared it, and that a report by a suitably qualified professional following accepted standards generally contains enough evidence and reasoning to be tested or replicated. That gives you a practical test for any valuer you are considering: will they show their working?

Qualifications: check the person who signs

Unlike property valuers in some settings, there is no single gate that every business valuer must pass. The ATO's valuation guide says plainly that there is no formal admissions board in Australia for business valuers, and that several professional bodies provide certification and standards. Its advice is to make sure your valuer holds any certifications needed for the purpose and has experience with the type of asset being valued.

In practice that means asking who will sign your report, what qualifications and experience that person has, and how many businesses of your type and size they have valued. A firm's website can describe a team; the report is signed by one person who stands behind it. Ask for that name before you engage, and ask whether they will be available to answer questions from the buyer, the other shareholder, your accountant or your lawyer after delivery.

Questions to ask before you engage

Independence and the fee

Independence is the quality a valuation is bought for. A valuer who is paid more for a higher number, paid only if a sale goes through, or paid by the party who benefits from a particular answer has an interest in the result. The ATO's guidance on getting a market valuation lists what it expects you to be able to show when you engage a valuer, including that you acknowledged the valuer's independence to reach their own conclusions and stated that the fee is not dependent on the report's outcome. It adds that if you engage and properly instruct a professional valuer, you generally will not be liable for penalties if the valuation turns out to be deficient.

So the fee arrangement is worth reading closely. A fixed fee agreed in writing before any work starts, based on the size of the job rather than the value, is the clearest arrangement. Business Valuations Melbourne sets its fees by annual turnover and fixes them at engagement, and everyone pays the same published fee.

What the report should contain

The ATO lists what it expects a valuation report to cover at a minimum: the purpose, the scope and any limits on it, details of the asset, the information and assumptions relied on and where they came from, the valuation date, the definition of value, the approaches and methods chosen with reasons and any cross-checks, and enough records to explain how the value was reached. Even if your valuation is not for a tax purpose, that list is a sound test of quality.

Watch for reports that give a multiple with no evidence, adjust earnings without listing each adjustment, or reach a figure with no reconciliation to a second method. Ask to see a sample report before you engage. If the sample is a few pages of general commentary and a number, expect the same for your business.

Turnaround, information and the start date

Speed matters when a buyer is waiting or a court timetable is running, but quoted turnaround times are only meaningful if you know when the clock starts. Some firms count from the first call, some from the first upload, some from when the last document arrives. Ask. At Business Valuations Melbourne, delivery is counted from when payment and all required information are in, and the document list is agreed at the start so you know exactly what that means.

Ask too whether the valuer will need to visit the premises. Most valuations of trading businesses run on documents and conversations, but where plant, stock or the site itself makes up much of the value, a visit or a separate plant or property valuation may be needed. Land and buildings are valued by a property valuer in Victoria, not a business valuer.

How to compare two valuers in five steps

1. 1.Write down the purpose, the valuation date and the entity or interest to be valued, so each valuer quotes on the same job.
2. 2.Ask each for the name and background of the person who will sign, a sample report and a written fee that does not depend on the value.
3. 3.Ask each whether they sell businesses, act for any other party in the matter or take any payment linked to the deal.
4. 4.Compare the document list, the method each expects to use and how each counts turnaround.
5. 5.Choose the one whose report you could hand to the other side, your accountant or a court without having to explain it away.

• ·Market valuation for tax purposes (guide), Australian Taxation Office
• ·Market valuation of assets, Australian Taxation Office

This guide explains how valuations work. It is not tax, duty or legal advice: those positions are for your accountant, lawyer or the relevant regulator.