Does the profits method of valuing pubs gauge the property or the business value?
Robert May explains the subtle differences. There are some trading properties, including pubs, which are valued by direct comparison of earnings potential. The use of Profit & Loss (P&L) accounts by property valuers to assess open-market values and open-market rents has led the Trade-related Valuation Group of the Royal Institution of Chartered Surveyors (RICS) to review guidance to its members. In addition to RICS property valuers there is another community of business valuers; typically accountants practising brokerage of businesses which are going concerns and advising on action for businesses with trading difficulties. For both types of professional, the best measure of value is derived from understanding a P&L account. This enables the business valuer to assess the affordability of the present business and the property valuer to consider market value by constructing a P&L that reflects its projected earnings. This takes into account the lease, terms of trading, competition, commun