to consider a break up value. An influencing factor with this method of valuation is
wether the required valuation is to be done on the business as a going concern.
Where a business does have significant tangible assets the appraiser needs to
consider a range of factors, including:
 Whether the book value (depreciated value) of the plant and other
assets is an appropriate reflection of current value, or whether a
revaluation (to market prices) of these assets is required;
 For specialist plant, whether a separate valuation of the plant is
required to support the broader valuation;
 Where any real property exists, such as land and buildings, these
should be valued by a licensed land valuer, to support the broader
business valuation.
Cost to Create Approach
Sometimes a purchaser will acquire a business because it is simply a cheaper
alternative or avoid some of the difficulties that may be experienced in setting up their
own business from scratch.
The purchaser would analyse his or her own costs that would be required to start up
and compare that to the purchase price for a business. It may be that a purchaser is
prepared to pay a premium above the comparable cost to create for the convenience,
time benefit or minor goodwill value that may exist with an established business.
This methodology is more likely to be used with quite small businesses, those that
have been in continuing loss positions, or where there is insufficient business history
to support other valuation methodologies.
©AVANTIA 2007
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