Keeping the books clean is an essential aspect of running a business. It involves maintaining accurate financial records of all transactions, including income, expenses, assets, liabilities, and equity. But it also means keeping the finances of the business and the owners separate – or at ‘an arm’s length’.

Businesses are valued in a number of different ways; discounted cash flows, net tangible assets, and cost of creation, to name but a few. The methodology most often applied however, is the capitalisation of future maintainable earnings (CFME)... and with it comes the often-misunderstood capitalisation rate, usually applied as a multiple.

Businesses that are valued on the basis of a multiple of their profit (or Earnings Before Interest and Tax) are being valued using the Capitalisation of Future Maintainable Earnings valuation methodology.

The cost of a business valuation in Australia can vary widely depending upon the firm providing it and the purpose of any report being produced.

It is widely agreed by business valuation experts that the Discounted Cash Flow (DCF) methodology is the most precise way of valuing a business.

Accounting practice valuations can be performed in a number of ways, but often valuations of a business, an entity, and a book of clients can be confused.

Businesses can be valued in a number of ways, including Net Tangible Assets, Capitalised Future Maintainable Earnings, Discounted Cash Flow, Net Realisable Value, and various others.