What Your Local Council Plans Mean for Your Business Valuation

The most immediate and significant impact a Council Plan has on your business valuation comes through zoning regulations. Zoning dictates the legally permissible uses for the land your business occupies, and this is where value is created or destroyed.

1. Commercial Property Value

If your business owns the premises, the valuation of the real estate is intrinsically tied to its “Highest and Best Use.”

• Positive Impact (Value Increase): A new Council plan that rezones a quiet commercial street for “Mixed-Use” or higher density commercial use (e.g., allowing for apartments above your retail store or a larger factory footprint) instantly increases the property’s development potential. This dramatically boosts the land value, which in turn increases the total net asset value of your business. If you are looking to invest in a business that owns its premises, our Buyers Agents (Target URL: /buyers-agents/) can assess the planning risk.
• Negative Impact (Value Decrease): Conversely, if a plan changes a high-traffic area to a “Residential” or “Environmental Protection” zone, or imposes stricter height/density limits, the property’s potential is curtailed. Future buyers may see limited expansion opportunities, leading to a discount on the sale price.

2. Business Operating Value (EBITDA Multiplier)

Even if you lease your property, local plans affect your business’s ongoing profitability (EBITDA), which is the basis for its operating value. For example, a new freeway exit or rail line near an industrial business improves logistics, boosting operational efficiency and thus value. Conversely, an increased requirement for more mandatory parking spaces for your medical centre limits the usable area, raising development costs for a potential buyer.

These changes directly impact future cash flow, which is the primary driver of a business’s multiple. Businesses in areas set for new infrastructure or activity hubs may be eligible for specific Commercial Finance (Target URL: /finance/) options to capitalize on the coming growth.

The Forward View: Strategic Plans and Future-Proofing

Sophisticated buyers don’t just look at today’s zoning; they look at the Council’s long-term Community Vision and Strategic Plans (e.g., a 10-year Financial Plan). These documents show where the Council is directing future investment and growth.

1. Capital Works and Infrastructure 🏗️

A Council’s multi-year budget for Capital Works is a signal of future economic activity. If your business is in an area scheduled to receive upgrades like improved fibre-optic internet, new public transport, or better streetscaping, its value is seen as more stable and future-proof by a buyer.

2. Competition and Market Dynamics

Council plans control the supply of land for various business types. If the Council’s plan intentionally limits the creation of new industrial parks, your existing industrial business benefits from a high barrier to entry for competitors, making it a scarcer and more valuable asset.

3. Compliance Risk

A buyer’s valuer will always assess the risk of a business being forced to relocate or cease trading due to a Council plan. A business that is non-compliant with a recently gazetted zoning plan carries a huge risk, which a buyer will reflect with a massive risk discount in the valuation multiple.

Action Plan: What to Do Before Selling Your Business

To ensure your local council plans add value to your business valuation, rather than subtract it, you need to be proactive:

1. Obtain a Current Planning Certificate: Before listing your business, pay the small fee to your Council for a certificate that confirms the current zoning, outstanding orders, and future road alignments. This pre-empts buyer due diligence and shows transparency.
2. Highlight Positive Potential: Provide a copy of the Council’s Local Environmental Plan (LEP) or Strategic Plan to potential buyers. Point out how your location benefits from future infrastructure.
3. Address Non-Compliance: If any aspect of your building (e.g., unapproved additions or use) is non-compliant, resolve it with the Council before the sale. A buyer will penalise you significantly more for the uncertainty than the cost of regularization.

By clearly demonstrating how your business aligns with, and benefits from, the local Council’s strategic vision, you turn a dry planning document into a compelling reason for a buyer to pay a premium price. If you are preparing for an exit, speak with our Business Broking team for a valuation that accounts for these critical planning factors.