Professional Business Appraisal vs Online Valuation Tool
When it comes to determining the value of a business, there are multiple methods available. Two popular options are using an online valuation tool or hiring a professional business appraiser to conduct a business valuation. Both have advantages and limitations. However, understanding the key differences between them can help you decide which approach is best for your needs. In this article, we explore a professional business appraisal vs online valuation with a focus on accuracy, cost, complexity, and the situations where each method is best..
Peak Business Valuation is a trusted business appraiser in the United States that values businesses from dozens of industries. If you have any questions about business valuations and how to obtain a business valuation, we are here to help. Schedule a free consultation with Peak Business Valuation today!
What is an Online Valuation Tool?
An online valuation tool is an automated software or calculator that provides a business value estimate based on the information you provide. These tools typically ask for financial data such as business revenue, profit, and assets. Online valuation tools also use preset formulas and algorithms to calculate an estimated value for your business.
In addition, these online tools are widely accessible and can be found on various websites. They often promise quick results with minimal effort. This makes them appealing to business owners who need a fast answer to questions about the general worth of their business. However, the accuracy and comprehensiveness are often lacking.
If you are weighing the benefits between a certified business appraisal vs online valuation and are not sure which option is best for you, consider speaking with a professional appraiser. At Peak Business Valuation, we have a team of expert business appraisers who help businesses across the nation. To prepare to schedule a free 15-minute consultation, see Questions to Ask a Business Appraiser.
What is a Professional Business Appraisal?
Next, a professional business valuation is a detailed, customized analysis conducted by a certified business appraiser. There are several common certifications and designations business appraisers earn after meeting educational and proficiency requirements. These can include the ASA (Accredited Senior Appraiser), CVA (Certified Valuation Analyst), and ABV (Accredited in Business Valuation). Peak Business Valuation has a team of certified valuation experts with ASA, ABV, and CVA designations.
Unlike online valuation tools, this process involves a thorough review of the business’s financials, industry conditions, market trends, and other factors that can influence the value of the business. Professional appraisers also use a variety of valuation methods to determine the value of a business. This includes the income approach, market approach, and asset-based approach. To learn more about the valuation methods mentioned, see Methods to Value a Business.
Business appraisers take the time to understand a business’s unique conditions and provide a comprehensive report. This valuation report explains the methodology used, the assumptions made, and the final business valuation. Learn more about valuation reports at Business Valuation Report Made Simple.
Peak Business Valuation is a reputable business appraiser with experience in dozens of industries. A business valuation is a comprehensive process that provides reliable results. If you are unsure if a professional business appraisal is the best option for you, speak with one of our business appraisers! Schedule a free consultation below.
Key Differences Between a Professional Business Appraisal vs Online Valuation Tool
Accuracy
- Online Valuation Tool: Provides an estimate based on limited data, which may not always reflect the true value of the business.
- Professional Business Valuation: This offers a more accurate and detailed analysis by considering all relevant factors and using multiple valuation methods.
Cost
- Online Valuation Tool: Typically free or low-cost, making it an affordable option for those who need a quick estimate.
- Professional Business Valuation: Professional valuations often range from a few thousand dollars to several thousand dollars, depending on various factors and valuation needs.
Time
- Online Valuation Tool: Quick results, often in minutes or hours.
- Professional Business Valuation: At Peak Business Valuation, on average, it can take 4-8 business days to complete, as it requires detailed analysis and research. For other firms, the average turnaround time is 2-4 weeks.
Customization
- Online Valuation Tool: Limited customization based purely on the numbers you input.
- Professional Business Valuation: Highly comprehensive, with the appraiser considering unique aspects of the business, industry, and market conditions.
Usefulness
- Online Valuation Tool: Good for providing a general estimate, especially for informal purposes or when you need a rough estimate of your business’s value.
- Professional Business Valuation: Essential for making important decisions such as selling, buying, legal disputes, tax planning, or mergers and acquisitions. It is also critical for securing financing or justifying the business’s value to third parties. A certified business appraisal may also be required, depending on the purpose of the business valuation.
When to Use an Online Valuation Tool vs a Professional Business Valuation
Choosing between an online valuation tool and a professional business valuation depends on your goals and the level of detail you need:
- Use an Online Valuation Tool if:
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- You need a quick, rough estimate of your business’s value.
- You are just starting to explore the potential sale or purchase of a business.
- You need a low-cost option for initial research or planning.
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- Use a Professional Business Valuation if:
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- You plan to sell or buy a business and need an accurate, reliable valuation.
- You need a valuation for legal, tax, or financial purposes, where accuracy is essential.
- You are looking for detailed insights and guidance from a professional appraiser.
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Conclusion
When determining a business appraisal vs online valuation, it is important to understand that each serves an important role in determining a company’s value. However, each method caters to different needs and should be approached with specific goals in mind. Online valuation tools provide a quick and cost-effective way to get an estimate, but they lack the depth and accuracy of a professional business valuation. If you are making critical business decisions that rely on accurate and detailed information, investing in a professional business valuation is the better choice.
If you are looking for a reliable business appraisal, Peak Business Valuation can help. We offer comprehensive business valuations, providing you with accurate and detailed insights. Schedule a free consultation below!
