Month: October 2019

Making Tax Digital Seminars – Mission Complete

My mission is complete, statistics as follows for 2018 and 2019

MBL Seminars for Accountants in Practice

  • 19 seminars delivered
  • Duration of seminar – 6 hours
  • 279 attendees
  • Locations – London, Manchester, Southampton, Leeds, Cambridge, Bristol, Edinburgh, Glasgow, Haverford West (Wales)
  • Price of Seminar £216 to £480 (this to MBL not to me, I am paid a presenter fee and expenses)
  • 99% rated the seminars as Satisfied or Very Satisfied
  • 71% rated the Speaker as Very Satisfied

UK Training for Businesses

  • 29 seminars delivered
  • Duration of seminar – 4 hours
  • 552 attendees (from some of Britain’s biggest corporates)
  • Locations – London, Manchester, Birmingham, Edinburgh, Southampton, Leeds, Glasgow, Sheffield, Newcastle, Bristol, Reading
  • Price of Seminar £269 (this to UK Training not to me, I am paid a presenter fee and expenses)
  • 98% rated the seminars as Good or Excellent
  • 55% rated the Speaker as Excellent

Scottish Government

  • 160 attendees
  • Edinburgh University
  • 2 hour presentation as main speaker

I have also done some other presentations and consultancy bringing the overall attendees to over 1,000

Its been great fun and I hope the attendees have been able to put my content to practical use.

I am also now helping Sage, the UK’s largest technology company, I have joined their Accountants Advisory Board.

Whilst first stage of MTD is now complete, there is more to come in 2021 with Income Tax and Corporation Tax, so I will be back and if Brexit happens then I am sure training and seminars will be needed to understand the changes.

Thank you to all those who attended and to MBL and UK Training for booking me.

Here are some pictures from my travels

How do you value a business and what is your business worth?

Ultimately businesses will be valued through a process of negotiation between the buyer and the seller. There isn’t a single right answer, valuation isn’t an exact science.

The main reasons to value a business are:

  • Incorporation of a Sole Trader or Partnership
  • Divorce
  • Probate
  • Internal reward systems
  • Sale of the business or part sale

In order to value a business the valuer will need gather information such as

  • Financial Accounts
  • Management Accounts
  • Budgets
  • Forecasts
  • Details of liabilities
  • Asset Valuations
  • Market analysis
  • Client Contracts
  • Staff information and records

Not all this information will be available but essentially the more information that is available the more detailed and accurate the valuation will be.

The Valuer will also look at Strengths, Weaknesses, Opportunities, and Threats (SWOT).

The financials will need to be adjusted for exceptional and one off costs and any revaluation of assets and liabilities.

The Adjusted net assets then have a Goodwill or Bad Will adjustment applied to create the ‘Value of the Enterprise’

Lord MacNaghten in the case of Commissioners of Inland Revenue v Muller & Co Margarine (1901) AC215 defined goodwill as follows – he said:
“What is goodwill? It is a thing very easy to describe, very difficult to define. It is the benefit and advantage of the good name, reputation and connection of the business. It is the attractive force which brings in custom. It is the one thing which distinguishes an old established business from a new business at its first start. Goodwill is composed as a variety of elements. It differs in its composition in different trades and in different businesses in the same trade. One element pay preponderate here, and other there.”

The formula for Goodwill is

GW = Σ NCIt-rANAVt/(1+i)t

sometimes simplified to: GW = (NCI -rANAV)/i

GW = Goodwill

ANAV = operating adjusted net asset value

NCI = operating net current income

r = cost of equity

i = discount rate (weighted average cost of capital)

t = number of periods

In reality goodwill is much harder to establish in small businesses

Using Multiples is also a common approach to valuations, the multiple could be against

  • Sales
  • EBIT
  • EBITDA
  • Earnings per share (P/E ratio)

The multiple is assessed based on similar businesses which have been sold.

Another frequently used approach is Discounted Cash Flow (DCF)

The discount rate is usually the weighted average cost of capital (WACC)

WACC = ((ke x E)/E+D) + ((kd x D)/E+D)

WACC = weighted average cost of capital

ke = cost of equity capital

kd = cost of debt

E = Proportion of long-term funding from equity

D = Propertion of long-term funding from liablities

There are several ways in which DCF can be used to establish the business value.

Steve Bicknell holds the ACCA Certificate in Business Valuations and has carried small business valuations.

steve@bicknells.net