Business Valuation in Singapore: A Complete Guide for Business Owners

Understanding the intrinsic value of your business is critical to making wise decisions in a fast-paced, competitive market like Singapore’s. A business valuation determines the “value of a company or business, helping reassure business buyers, investors, and owners”.

This post on business valuation will cover what business valuation is, why it matters, the valuation process, and how you can leverage professional business valuation services in Singapore to help you achieve your goals. We’ll also discuss step-by-step business valuation and how company valuation works in Singapore, in layman’s terms.

 

What Is Business Valuation?

Business valuation is performed to determine a business’s market value (or other similar premise) and, depending on the purpose, may be governed by professional standards. It’s the best way to determine a business’s value in dollar terms. It is no longer just about the here-and-now financials, but also about where the business can go in the future.

At the end of a valuation report is also a market value (or other similar premise) estimate, defined as the price to be paid between a willing buyer and a willing seller in an open market.

 

Why Is Business Valuation Important in Singapore?

Singapore is a key hub of global commerce, and companies are regularly bought and sold as they seek capital and plan to grow or reconfigure. There are many reasons why it is important to know what your business is worth:

• Selling or Buying a Business

A valuation when selling your business or buying someone else’s establishment makes the final price clear and reasonable for everyone.

• Fundraising and Investment

Investors and lenders will want to know your company’s value before they invest or lend money. This instills trust and helps the process of negotiation.

• Strategic Planning

Valuation can help owners guide strategic decisions, such as expansion, restructuring, mergers, and exit planning.

• Tax and Compliance

A business in Singapore is required to obtain an external valuation if an asset (for example, land) is to be declared annually as part of reporting obligations.

• Legal and Shareholder Matters

Valuations frequently mitigate disputes over shareholder differences of opinion, divorce, or ownership changes.

 

Business Valuation Methods Explained

There is no single way to value a business. The method selected will depend on the nature of the business, the industry it operates in, its size, the availability of information required and the purpose of the valuation. The three common approaches are:

• Income Approach

This approach forecasts future cash flows and converts them to a present value. Discounted cash flow analysis is one popular method under this approach.

• Market Approach

This method compares your business to similar businesses that have recently sold. Valuers rely on figures such as EV/ EBITDA, price-to-earnings multiples or other market multiples.

• Asset-Based Approach

This approach values an enterprise as the sum of the net values of all its tangible and intangible assets. And for asset-heavy businesses or firms with volatile earnings, it is useful.

A formal valuation commonly relies on a few of these approaches to create a meaningful range.

 

Common Situations When You Need a Business Valuation

As either a founder, an owner, or an investor, the following are typical business situations where valuation matters:

• Sale or acquisition preparation
• Raising money from investors or banks
• Succession or estate planning
• Resolving shareholder conflicts
• ESOP (employee stock ownership plan) for compliance
• Tax assessment and legal compliance

With its experienced team of valuation experts, the business valuation firm in Singapore offers professional services to get it done.

 

Overview of the Business Valuation Process

Familiarity with the business valuation process equips business owners to better consult with valuation professionals.

Step 1: Clarify the Purpose

First, the valuer will ask you what you need it valued for. It could be for sale, investment, litigation, tax planning, or compliance. The task defines the premise of value to be used, methods and the work scope.

Step 2: Collect Business Information

Here are the documents and data the valuer will need:

• Statement of financial position (statement of profit and loss)
• Cash flow history
• Business plans and projections
• Industry and market information

Step 3: Choose Valuation Methods

Valuers then adopt the relevant valuation methodologies based on the data and the business’s aims.

Step 4: Analysis and Valuation

The valuer examines and analyses the data, develops valuation models, estimates risks, and provides valuation estimates.

Step 5: Prepare Valuation Report

Finally, a comprehensive report is written that consists of:

• Valuation assumptions
• Supporting data and rationale
• Final value estimate with explanation

Step 6: Review and Finalise

After the review, the valuer reviews the report with the client and explains anything they don’t understand. Minor adjustments may then be made before sharing the final valuation.

 

Choosing the Right Business Valuation Services in Singapore

It is a critical decision when choosing a professional valuer for company valuation in Singapore. Key factors include:

• Experience and Expertise

Go for companies that can demonstrate a track record of valuing businesses like yours, whether they’re an SME, a startup, or a large corporation.

• Industry Knowledge

Professional valuers are also familiar with industry dynamics and market forces that may affect your business’s value.

• Reputation and Standards

Find experts who adhere to established valuation standards and have a strong market reputation.

• Clear Reporting

Valuations should be clear, easy to follow, and based on sound reasoning and facts.

• Delivery Time and Support

The ability to deliver during those in-time discussions with investors, buyers, or regulators is highly valuable.

Working with reliable business valuation services in Singapore also increases the likelihood that you will receive a reasonable, transparent, and useful valuation report to take the necessary next steps.

 

How Much Does Business Valuation Cost in Singapore?

A few factors determine valuation cost:

• Business size and complexity
• Purpose of valuation
• Availability of financial data
• Required depth of analysis

Valuation fees are generally lower for smaller businesses, while valuation fees in mergers, acquisitions, or court cases tend to be higher. Most of these valuation firms offer consultations to give you an idea of the costs involved before committing.

 

Common Uses of Company Valuation in Singapore

Business valuation is acceptable in many situations, such as:

1. Mergers and Acquisitions (M&A): In Mergers and Acquisitions, accurate valuation empowers discussions to reach deals at market value and provides a clear view of the company’s value. A robust valuation minimises pricing disputes, supports due diligence, and ensures all parties go in and come out of a transaction knowing where they stand.
   
2. Fundraising & Investment Rounds: Attracts investors with a credible value proposition that demonstrates the business’s financial health, growth potential, and risks. This serves to attract the right investors and promotes genuine conversations about topics such as equity, ownership structure, and investment terms.
   
3. Legal and Tax Compliance: Meets regulatory requirements and compliance by delivering valuation reports for audits, tax returns, ownership matters, and litigation, helping companies comply with statutory reporting standards.
   
4. Succession and Exit Planning: Supports owners in planning for long-range transitions by helping them prepare for changes in ownership, leadership transitions, or business exits, while maximising the overall value of the practice.

 

Final Thoughts

Business valuation is a crucial assessment for the owner(s)/ shareholder(s) who are looking to take critical decisions and want to gain strategic clarity. Whether you are “getting your company ready for sale, attracting investors, planning an exit, or complying with regulations”, a valuation gives you the confidence to make informed decisions.

Learn about the business valuation process, utilise proven valuation methods, and leverage reputable business valuation in Singapore to safeguard your future and capitalise on potential long-term gains.

A professional valuation can provide you with a sense of your company’s value today and suggest a plan to improve it going forward. Always engage valuers with experience who are familiar with your operation and the Singapore market.