The Prime Minister, Chris Hipkins has announced that the minimum wage will go up from April 1 2023, to $22.70 – a 7% increase from $21.20. The Starting-Out and Training minimum wage rates will be maintained at 80% of the adult minimum wage.

Costs are increasing

Even if you don’t employ one of the 175,000 Kiwis who earn minimum wage, this may impact your business. Wages rise steadily over time, and employees who missed out on a pay rise this year will probably expect one next, if your business has been thriving.

In addition to the rising cost of labour, inflation is forecast to put upward pressure on everyday items. That will likely increase your general running costs and the price of materials. Petrol prices are up, for instance, and supply chain issues have driven up the cost of many imported products.

Time to review your pricing

Is it time to put your prices up? Ideally, your business should increase costs by a tiny amount each year, rather than by a big jump every five years, for instance. Small increases help prevent price shocks for customers, and keep your business in line with the rest of the market.

Can you also cut costs?

If you don’t think increasing your prices is an option, or you still need to make more of a change, you may need to cut back your spending. We look at your business line by line, so we can help you identify areas where you might be able to trim the fat.

Give us a call or drop us a note – we’re here to help.

Earnings and assets

The two most important value drivers of your business are earnings and assets. These are the main selling points – strength of earnings and/or valuable assets will make any business more attractive.

Other intangible factors can play a part in adding value, like goodwill and potential. These can definitely make a business more saleable, but they aren’t always easy to put a price on. Coming up with an accurate valuation on a privately-owned business can be tricky.

No single formula for finding a value

The most common way to value a business in New Zealand is: EBITDA x Industry multiplier. EBITDA is earnings before interest, tax, depreciation and amortisation. Each industry will have a multiplier, or one can be estimated by looking at other local and international sales. That’s a basic starting point, which can then be tweaked depending on the strengths or weaknesses of the individual company.

There are also plenty of other methods for arriving at a valuation. Sometimes a business will be sold for a multiple of revenue, or simply for asset value. There are so many variables that it’s tough to estimate on the back of an envelope; that’s where we can help.

We can value your business

Valuing a business takes a bit of skill and a bit of experience. If you’re considering selling, we can help you put a value on your business, draw up accounts to show a potential purchaser, and give you ideas about how to get the best price.

You might need a business valuation for other reasons – for the bank, maybe, or for a staff share scheme. Once again, we can work with you to figure out what your business is worth. We’ll look at all its assets, its earnings and the intangible factors that make your business uniquely appealing.

Get in touch – we’d love to help.