How to choose a valuer for your agency, and what to ask before you engage one.

Choose a valuer who is independent of the deal, gives you a signed written report, explains the method and evidence behind the number, and charges a fee that does not depend on the result. The ATO's guidance does not name a required credential. It says acceptability usually depends on the valuation process rather than who prepared it, that a report by a suitably qualified professional following commonly accepted standards is considered more reliable, and that every valuation must be objective and supported by evidence. Members of the Australian professional accounting bodies who provide valuation services must follow APES 225 Valuation Services. Before engaging anyone, ask about scope, basis of value, valuation date and who signs. Our fixed fee starts at $1,495 + GST for revenue under $2 million.

Who can value an agency in Australia?

The ATO says a market valuation must be objective and supported with appropriate evidence. It says acceptability usually depends on the valuation process rather than who conducted it, and that a report by a suitably qualified professional following commonly accepted standards and codes of conduct is considered more reliable. Its guidance does not name a single required credential. What it looks for is a supportable process, a report that explains the basis of the value, and records that show the work.

APES 225 Valuation Services, issued by the Accounting Professional & Ethical Standards Board, applies to members of the Australian professional accounting bodies that have adopted it. Those members must follow its mandatory requirements when they provide valuation services in Australia, including what a valuation report must disclose.

In practice, the right valuer for an agency is someone who values businesses, not property, and who understands how agency income behaves: how rent rolls lose and gain properties, how trail income and clawback work, how much of a marketing agency's revenue sits in retainers, and how licensing and key people affect risk. Ask to see how they would approach your type of agency before you engage them.

What does independence mean in practice?

APES 225 describes independence as two things: independence of mind, meaning a conclusion not affected by influences that compromise professional judgement, and independence in appearance, meaning no facts or circumstances that would lead a reasonable and informed third party to doubt the valuer's objectivity. A written report must say whether the valuer acted independently. For an agency valuation, independence usually looks like this:

• ·The valuer has no financial interest in the agency, the buyer or the outcome.
• ·The valuer is not acting for either side in negotiating the sale.
• ·The valuer is not brokering, listing or selling the agency, rent roll or book.
• ·The fee is agreed before work starts and does not change with the value. APES 225 prohibits contingent fees for a valuation that requires or claims independence, and the ATO says valuer instructions should state that any fee is not dependent on the report's outcome.
• ·The report sets out the method and evidence so another party can test the conclusion.

What should you ask a valuer before engaging them?

These questions sort out most of the differences between providers quickly, and a good valuer will be glad to answer them in writing.

• ·Will I receive a signed written report, and who signs it?
• ·What exactly will be valued: the rent roll, the business assets, or shares or units in the entity?
• ·What basis of value and valuation date will the report use?
• ·Is the fee fixed, and does it change if the value is higher or lower?
• ·Do you, or anyone connected with you, broker, list or buy agencies?
• ·What information will you need, and how will gaps be handled in the report?
• ·Which valuation methods will you consider for this type of agency, and how will you cross-check the result?
• ·Who can rely on the report: me, my adviser, the other party, a lender?
• ·When will I receive it, and when does that clock start?

Written report or appraisal: what is the difference?

Both have a place. A sale appraisal from a business broker or agent is a useful guide to how the market may receive a listing. An independent written valuation is built for situations where the number has to be explained and relied on.

When do you need a written report rather than an appraisal?

A written report is the safer choice whenever someone other than you will test the number. Common examples:

• ·Tax: the ATO lists non-arm's length transactions, including transfers between related parties, and the small business CGT concession asset threshold tests among the situations that may need a market valuation.
• ·A partner, shareholder or unitholder exit priced under an agreement.
• ·A dispute, mediation or court proceeding, where an expert report is needed.
• ·Finance, where a lender asks for an independent value of the agency or book.
• ·A restructure, or any valuation at a past date.

How do valuation engagement types differ?

APES 225 defines three kinds of valuation service. Knowing which one you are being offered tells you how much weight the result can carry.

What does a fixed-fee agency valuation cost?

Our fee is set by the annual revenue of what is valued and agreed before work starts. Delivery time starts once payment and all required information have been received.

• ·Market valuation of assets, Australian Taxation Office
• ·APES 225 Valuation Services (revised October 2024), Accounting Professional & Ethical Standards Board
• ·Valuation Services pronouncements, Accounting Professional & Ethical Standards Board