Profits Method

Question 1

What is the Profits method used for?

Answer 1

a trade related property

When the value of the property depends upon the profitability of its business and trading potential

Question 2

What’s necessary for the Profits method?

Answer 2

• Audited accounts for 3 years

(audited are superior to management accounts)

Question 3

What’s the methodology?

Answer 3

1. Annual turnover
2. Less costs = Gross Profit
3. Less working expenses = Unadjusted Net Profit
4. Less operator’s renumeration = adjusted Net Profit/ Fair Maintainable Operating Profit (FMOP)

Expressed also as EBITDA.
Capitalise at appropriate yield to achieve market value