Business advisory
Business valuation readiness: build the fact base before asking for a number
A practical framework for organising purpose, financial evidence, forecasts, ownership and value drivers before a valuation engagement begins.
Start with the decision the value must support
A business may need value for a transaction, financing, tax, planning, reporting, dispute, ownership or other decision. Those situations can have different intended users, dates, standards of value, evidence needs and reporting expectations. Start by describing the decision and who will rely on the work, rather than beginning with a desired outcome.
Record the relevant date, the entity or interest being considered, the decision deadline and any existing request from a lender, investor, adviser or other stakeholder. This creates a useful engagement conversation without assuming that a particular valuation conclusion is appropriate.
Build a financial story that can be checked
Bring together historical financial statements, management accounts, tax returns where relevant, forecasts, material adjustments and the supporting records behind them. A reviewer should be able to trace a material number back to its source and understand the period, accounting basis and limitations of the information provided.
If earnings include one-off items, owner compensation, unusual contracts, related-party activity or a recent change in operating model, describe the fact and supporting evidence rather than applying an untested adjustment. Transparency about uncertainty is more useful than a spreadsheet that appears precise without explaining its assumptions.
Connect the numbers to the operating drivers
Financial results gain meaning when they are connected to the business model: customers, pricing, concentration, contracts, delivery capacity, working capital, capital expenditure, financing, intellectual property, people and risk. The relevant drivers differ by business, so the objective is to show which facts can explain the historical record and which assumptions shape the future view.
Keep a concise log of assumptions and open questions. It should identify the owner, supporting information, date and the decision that would change if the assumption proves inaccurate. This keeps management, advisers and potential users aligned without treating a forecast as a guaranteed result.
Make scope and limitations explicit
Valuation is purpose-specific work. The appropriate procedures, standard, report, intended use and reliance language need to be agreed before an engagement is accepted. Information supplied by management may be used subject to the nature of the work and the engagement terms; a readiness checklist does not replace professional judgement or a defined scope.
This article is general information, not a valuation opinion, investment recommendation, legal advice or tax advice. Obtain advice based on the relevant entity, ownership interest, evidence, jurisdiction and decision before acting.
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This article is general information and may not reflect the latest standards, law or your specific circumstances. It is not audit, tax, legal, investment or other professional advice. Obtain advice before acting.