Business Value and Bankability Check

What it is

The Business Value and Bankability Check tells you what your business is likely to be worth today, what it could be worth, and what a bank would make of it if you asked to borrow. We work out what the business really earns once your own wages and one-off items are set aside, apply published Australian multiples for your industry and size to give an indicative range, score the things that push the price up or down, and rate the business against what lenders check first. You leave with a 12-to-18-month plan of the five changes that move the value or the bank's answer most, with a dollar value on each. It is not a formal valuation; it tells you where you stand and what to fix before a buyer, a partner or a bank looks.

How we do it

We take three years of accounts and tax returns and work out your maintainable earnings: what the business earns once your own wages are replaced with what it would cost to hire a manager, and one-off items are taken out. That is the figure a buyer or a bank starts from.

We apply published Australian multiples for businesses of your industry and size to give an indicative range, low to high, and score seven things that move the price: how much depends on you, how concentrated your customers are, how much revenue repeats, the contracts in place, the state of the records, and the trend in margin and growth.

We rate the business against the five things a bank checks first (whether earnings cover repayments with room to spare, your ATO and super position, trading history, security and records), then write the value plan: the five changes over the next 12 to 18 months that move the multiple or the bank's answer most, each with a dollar value and an owner. We walk you through it in a 60-minute session and call you 30 days later.

Is this for you?

Clients usually call us for this when:

• You are thinking about selling in the next few years and want to know where you stand.
• You are bringing in a partner and need a starting point for the conversation.
• You want to borrow for growth and would like to know what the bank will see before you ask.
• You are thinking of buying another business.
• You simply want to know what the business is worth and what would change that.

What you receive, and what each gives you

• Value model, unlocked: maintainable earnings normalised for owner's wages and one-offs, applied to published multiples for the industry and size, giving an indicative range (clearly not a formal valuation)A spreadsheet, fully open and yours to keep, that works out what the business really earns and applies published multiples for your industry and size to give an indicative value range, low to high. It is clearly marked as indicative, not a formal valuation.
• Value-drivers scorecard: owner dependency, customer concentration, recurring revenue, contracts, records, margin trend and growth, each rated with its estimated effect on the multipleA scorecard of the seven things that move the price (owner dependency, customer concentration, recurring revenue, contracts, records, margin trend and growth), each rated with its estimated effect on the multiple, so you can see what a buyer would mark you down for.
• Bankability scorecard: serviceability with a buffer, ATO and super position, trading history, security, records, rated against what a bank checks firstA scorecard rating the business against what a bank checks first: whether earnings cover repayments with a buffer, your ATO and super position, trading history, security and records, with an estimate of how much the business could borrow.
• 12-to-18-month value plan: the five changes that move the multiple or the bank's answer most, with dollar values and an owner for eachA 12-to-18-month plan of the five changes that move the value or the bank's answer most, each with a dollar value and an owner, so the next year's effort goes where it counts.
• Findings report with a one-page summary, a 60-minute session with the owners, and the 30-day check-in callA findings report with a one-page summary, a 60-minute session with the owners to talk it through, and a 30-day call to check how the plan is going.

What changes for you

• A realistic range for what the business is worth today, and what it could be worth.
• You know what a buyer, a partner or a bank would question first, before they ask.
• A clear plan for the next 12 to 18 months, with a dollar value on each change.
• No surprises when the time comes to sell, bring someone in or borrow.

The questions it answers

• What is the business worth today, roughly, and what could it be worth?
• What would a buyer or a bank mark us down for?
• Would a bank lend to us, and how much?
• Which five things should we change over the next year or so?

Words we use, explained

Maintainable earnings

What the business earns in a normal year once the owner's wages are replaced with a market wage and one-off items are removed. It is what a buyer or a bank counts on.

Multiple

The number a buyer pays for each dollar of earnings. A business earning $500,000 a year sold at a multiple of three is worth about $1.5 million before debt.

Serviceability

Whether the business earns enough to make its loan repayments with room to spare, including if interest rates rise.

What we’ll need from you

A one-page checklist comes with the engagement letter, with a private page to upload everything. The main items:

• Profit and loss and balance sheet for the last 3 financial years and year to date
• Business and directors' tax returns for the last 2 years
• Owner's and family members' wages and benefits taken from the business, and any one-off items in the last 3 years
• Sales by customer for the last 12 months, and any contracts or recurring arrangements
• Aged debtors and creditors as at the last month end
• Loan, lease and overdraft schedule with balances, repayments and security
• Last 4 BAS lodgements and the ATO integrated client account statement

Not included

• A formal valuation. The range is indicative and must not be used for a sale, a dispute, a tax matter or a court; a formal valuation needs a registered valuer or valuation specialist.
• Recommending a lender, loan or credit product. Wickham Advisory holds no Australian Credit Licence.
• Preparing a loan application (that is the Finance Ready Pack).
• Negotiating a sale.
• The multiples come from published Australian sources at the date stated and change over time.

What buyers and banks look at

A buyer, a bank, a partner and the tax office each read the same business differently. The check rates you against each view, so you can see what they would notice first and what would change their answer.

The value range is indicative only and is not a formal valuation. Multiples are drawn from published Australian sources at the date stated and change over time. We do not recommend any lender, loan or credit product.

The technical detail

An indicative value range from maintainable earnings and published Australian multiples (not a formal valuation), a scorecard of what moves the price up or down, a bankability scorecard rated against what lenders check first, and a 12-to-18-month plan of the five changes that move the value or the bank's answer most, with dollar values.

Common questions