- Selling a business
- Merging or acquiring another company
- Financing a business
- Transferring or establishing partnership ownership
- Resolving legal disputes and divorce cases
- Estate planning
A valuation from an independent, professional appraiser is the best assurance of the worth of your company. If your case is challenged in court or by the IRS, it can be defended.
After finding a quality business appraiser, here are several questions you should ask the prospective appraiser before establishing a contract.
How many valuations did you (or your firm) do over the last (three) years?
When evaluating a business appraiser, you want someone who can demonstrate their competency and experience. Many firms perform a variety of financial services. For instance, accounting or business brokers may perform valuations but it may not be their focus. Using a business appraiser whose focus is valuation will help to ensure competency and experience. In addition, a majority of valuation services need to be performed in accordance with reporting standards that business brokers or accounting firms do not adhere to.
Have you previously valued interests like that of the subject business and have competency in the subject industry?
There is a wide range of types of business valuations. From litigation to partnership buyouts, the valuation process is vastly different. A valuation firm that understands your business and subject industry will have a better knowledge of the value drivers and what impacts the value of your business.
What valuation credentials (or designations) do you hold? Are your credentials up to date?
A credible, qualified appraiser is essential. Besides extensive knowledge and experience, a business owner should look for an appraiser who holds the right credentials. There are three professional associations in the U.S. offering education and professional credentials in the appraisal of private business interests.
- American Society of Appraisers (ASA), which offers the ASA
- National Association of Certified Valuation Analysts (NACVA), which offers the CBA and CVA
- American Institute of Certified Public Accountants (AICPA), which offers the ABV
Having one or several of these designations gives the analyst creditability before the eyes of the IRS. These designations also require continuing education courses to keep certification current. Note that merely having a CPA or an advanced business degree is not evidence of valuation competency.
What valuation methods do you typically use in a case like this one?
Valuation approaches are methods a business valuation expert uses to determine the value of a business. Depending on your specific situation, one approach may be more applicable than another. The three most common methods are as follows:
- Asset approach
- Income approach
- Market approach
What procedural reporting guidelines do you follow?
The most widely cited and recognized set of professional standards for appraisals is the Uniform Standards of Professional Appraisal Practice (USPAP), published by The Appraisal Foundation. USPAP covers appraisals for all disciplines, including real property, personal property, business interests, and intangible assets.
The AICPA has its own set of standards titled Statement on Standards for Valuation Services (SSVS-1). All CPA-members must follow SSVS-1 when representing that they are performing a formal appraisal.
What sets you (or your firm) apart from other valuation practitioners?
While many firms perform valuations, the level of engagement and benefit to the owner can be vastly different. At Peak Business Valuation, our mission is to build businesses that thrive. As such we spend time building relationships with business owners to help them understand the value of their company and identify steps they can take to increase it. Personal values are key to everything we do. From building meaningful relations, to attracting great minds, and conducting our business with integrity.
If receiving meaningful value in your valuation is important to you, we submit that we can outperform any other option you may have. Peak Business Valuation is here to answer any questions you may have. Please reach out via email or through a phone call.