What a valuer actually looks at in your financials

Your accountant and your valuer can study the same set of statements and ask entirely different questions of them. One is establishing what happened. The other is testing what it is worth.

Revenue quality, not just revenue

How much of the revenue recurs, and how much was won this year? How concentrated is it, and what happens if the largest customer leaves? Are contracts in place, how long do they run, and what margins sit behind each stream? Revenue tells you the size of a business. Its quality tells you the value.

Owner and related-party benefits

Every dollar the business spends on the owner's behalf is either a real cost of doing business or an adjustment. The difference has to be established, documented and defensible. This is one of the areas where valuations quietly diverge the most, and where a clear schedule in the working papers saves an argument later.

Capital expenditure and working capital

A profit figure that ignores the equipment the business will have to replace, or the working capital tied up in a growing order book, flatters the business. A valuer looks at what it takes to keep the earnings coming.

Trends rather than snapshots

Three to five years of numbers, with the story behind them: what changed, what was one-off, and whether the direction of travel is durable. One good year is a data point. A pattern is evidence.

What is not in the numbers at all

Systems, contracts, staff, key-person risk, documentation and the true state of the assets are all invisible in a profit and loss statement and all part of what a buyer is buying. A valuer will ask for them, because value usually sits where the accounts stop.

A free indicative range is a useful first read on how those questions are likely to land for your business: start here.