There are times when I’m asked to value a business.
I receive what appears to be a relatively straightforward brief.
The owner is seeking a valuation for bank finance or a capital raise.
On the surface, it is a valuation exercise.
But once you start looking at the numbers, the conversation can change quickly.
The Initial Valuation Brief
In one case, I was asked to provide a value perspective for a business that had been operating for some time.
The expectation was that we would review the financials, assess maintainable earnings, apply an appropriate multiple, and arrive at a range.
That is usually how these engagements begin.
But as we worked through the information in more detail, I saw a different picture.
Losses were increasing.
Liabilities were increasing on the balance sheet.
Cash was tight, and assets were limited.
These aren’t unusual on their own, but together, they change the nature of the discussion.
When the Focus Shifts from Value to Viability
There comes a time when valuation stops being the right question, and the focus shifts from “what is this business worth?” to “is this business viable”?
That change isn’t influenced by opinion, but rather it comes from understanding the numbers properly.
Are debts being paid on time?
Is the business generating sustainable cashflow?
Is there a realistic route to safeguard the position?
If the answer to those questions is unclear or negative, valuation becomes a secondary topic.
In some instances, the business does not have a value in the conventional sense.
Instead, it may be insolvent.
And that won’t always be an easy conversation to have.
The Indicators of Underlying Financial Stress That I Can’t Ignore
There are a few signals that tend to bring clarity quickly.
significant liabilities with no clear capacity to reduce them
ongoing losses without a recovery path
unable to meet debts when they’re due
reliance on short-term measures to manage cash
These are structural issues.
And when they present themselves, the conversation needs to widen.
The Impact of Timing on Available Options
Where these situations tend to diverge is timing.
If the position is identified early, there are usually options.
creditors may be open to renegotiation
funding may still be available
the balance sheet can sometimes be restructured
the business may be stabilised and continue to trade
The outcomes of those depend on time and cooperation.
When the issue is identified later, the position is different.
The ATO may issue a Director Penalty Notice.
A creditor may take legal action.
A financier may withdraw support.
At that point, the pathway is more defined.
As a result, options are reduced, and decisions are no longer entirely in the owner’s control.
How I Approach These Situations
When I am brought into these situations, my role is to provide clarity where it's needed.
Not to alarm or overcomplicate, but to understand the financial position. I explain it in practical terms and outline what options are realistically available.
In some cases, that involves working alongside the existing adviser to stabilise the business.
In others, it involves preparing for a more formal process.
The approach is the same.
Calm assessment. Structured analysis. Clear communication.
If you are involved with a client where a valuation question is starting to raise broader concerns, it can be useful to pause and assess the underlying position.
I am available to provide a structured second view where needed.
The aim is to understand the numbers clearly, outline the available options, and support you in determining the next step. I’m happy to have a confidential discussion if needed.