Why EOFY Is a Smart Time to Revisit Business Valuation

Every EOFY, advisers sit down with clients to review financial statements, discuss tax outcomes, and assess performance for the past year .

While those conversations are important, the opportunity to discuss value is often overlooked.

What I have noticed consistently is that valuation conversations tend to happen at the wrong end of the process. Owners engage with the question of value when they have to, not while they have the room to act on what it reveals.

That is why I think EOFY is often one of the best opportunities advisers have to help clients understand what is driving the value of their business while there is still time to improve it.

What a Beer Keg Business Taught Me About Valuation Timing

A few years ago, I worked with a beer keg business that had developed a lighter alternative to the traditional steel keg.

The product solved a clear commercial problem. It reduced freight costs, made handling easier and created real savings across the supply chain. As the business grew, the owners began to consider what it might be worth and how a buyer would assess the opportunity.

While the business had strong potential, some of the underlying value drivers buyers look for had not yet been fully developed. With earlier planning, there would have been more time to strengthen those areas before value became a live question.

That is why EOFY is such a useful moment for advisers to raise the question of value. The financial review is already happening. The numbers are already being assessed. The next step is to look at what those numbers reveal about the future strength, risk and value of the business.

What Buyers Are Really Looking At

This is where I think EOFY conversations can become much more valuable.

When financial statements, tax outcomes and compliance matters are being reviewed, a lot of the information that influences business value is already on the table. Revenue, margins, customer mix, profitability, working capital and growth trends can all point to something bigger than what happened in the past year.

They can also reveal how strong, sustainable and transferable the business may be in the future.

In my experience, buyers are rarely looking at profit in isolation. They are looking at the quality of that profit, the reliability of future earnings and the risks that may sit beneath the surface.

The drivers that often have the greatest influence on value include:

• the quality of earnings and EBITDA

• a history of profitable growth

• recurring or contracted revenue

• customer concentration

• documented systems and processes

• reliance on the owner

• the overall sales profile of the business

These are the factors that determine whether a buyer sees opportunity, risk, or both.

In the case of the beer keg business, the discussion quickly moved beyond historical financial performance to understanding how those strengths would be viewed by the market and what could be done to strengthen the underlying drivers of value over time.

That is often I see where the greatest benefit of a valuation engagement sits.

Why the Number Is Only Part of the Conversation

Once those value drivers are understood, the conversation becomes much more practical.

If a buyer would look closely at earnings quality, revenue profile, customer concentration, systems and owner reliance, then those are the same areas worth discussing well before a transaction is on the table.

In my experience, this is where a valuation conversation becomes most useful. It helps business owners move from a broad question – “what is my business worth?” – to more specific questions:

1. Is the business too reliant on one customer, one person or one revenue stream?

2. Are earnings consistent, sustainable and easy to explain?

3. Are systems and processes documented well enough for the business to operate without heavy owner involvement?

4. Is the current growth profile strong enough to support the value the owner expects?

Those questions are much more useful than a number on its own because they point to the areas that can actually be improved over time.

When the valuation aligns with expectations, it can be reassuring. When it doesn’t, understanding the drivers is more important than the number itself. This is where advisers can provide significant value to their clients, by helping them understand what it means and where opportunities for improvement may exist.

The strongest valuation outcomes I have seen were the result of decisions made years beforehand, and EOFY is the right moment to start that conversation.

That is exactly what I will be covering in our upcoming masterclass:

What Is Your Business Really Worth, and What Is Holding It Back?

We'll explore the drivers buyers assess, the factors that commonly reduce value, and the practical steps owners can take to strengthen their position before a sale, succession event or capital raise is being considered.

If you or your clients are considering a sale, succession plan or capital raise in the coming years, I encourage you to join us.

Register here:

https://business-valuation-masterclass.scoreapp.com/