Acta Universitatis Danubius. Œconomica, Vol 15, No 3 (2019)

The Art of Valuing SMEs in South Africa

Louise van Scheers, Thea Visser

Abstract


There is no formal structured market where the most correct values of SMEs could be determined therefore valuing SME type businesses is more of an art than a science.  The aim of this research was to obtain a better understanding and knowledge of the appropriate valuation methods and value factors contributing to the most correct market value of SME type businesses.

The problem emanates from the fact that SMEs cannot properly be appraised, and a value be attached to it is the effect of a slow transfer of skills and a slow growing SME sector in the South Africa economy

Quantitative paradigm was deemed appropriate for the primary research. The goal was to interview 10 different SME business brokers, 30 SME buyers and 30 SME sellers in order to conduct a creditable investigation and recommendation.

The conducted research confirmed that strategic value contributing factors for selling an SME are recognised by the general market.  Generic valuation method for five types of SMEs, namely:  Supermarket, restaurant, liquor store, coffee shop and hardware shop were created.

SMEs play a vital role in the economy of South Africa, and therefore, their sustainability is crucial. This study will indicate to SME owners how to value their SME.


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