Things to Know Before a Business Valuation
Hire the Right Appraiser
There are a variety of appraisal and valuation experts. Before beginning, you will need to determine what type of valuation you need. When selling equipment, look for an equipment appraiser. Selling real estate? Use a real estate appraiser. When selling your business, you will want to look for a business appraiser also known as a business valuation expert to determine a value or range of values.
Define the Project
Before engaging in a project, a business appraiser will want to know some key information. This may include a description of the specific ownership interest to be valued. Second, the specific valuation date. This date may be a current or historical date. Lastly, an appraiser will ask for a description of the purpose of the appraisal. This includes why the client needs an appraisal and how it will be used. After the business appraiser understands the client’s specific needs, the work is scheduled and a fee is set.
Know the Costs
A business valuation can cost anywhere from a few thousand dollars to much greater depending on the scope of the project. Most written, formal appraisal reports average between $2,500 and $5,000. The greater the scope and complexity of the project, especially for litigation purposes, the higher your fee.
Interview a Few Appraisers
Ultimately, you want to choose a credentialed appraiser best suited to your circumstances at a cost-effective and affordable fee. Get a variety of estimates from several appraisers, consider their qualifications and evaluate what your specific needs are. Selecting the lowest-cost provider may be penny-wise, but in the end is foolish and may cost you more.
Look for Experience and Credentials
Every business appraisal is unique. Business appraisers gain experience over time with a broad client base. As such they gain substantial ability to understand each client’s unique situation. While credentials do not guarantee performance, it shows a level of professionalism and qualification to perform the work. Before a business valuation, learn how to find a quality business appraiser.
Involve an Appraiser Early
Even in straightforward buy/sell agreements, family partnerships, or reorganizations, an appraiser can give you great advice before the deal closes. Appraisers help identify key elements of the business that can impact the contract, the value of the business, and be meaningful to the client.
Expect the Best
The fee for a business appraisal is minimal compared to the risk. The best appraisers spend the time to understand both the qualitative and quantitative aspects of your business. A quality appraiser will communicate the results both orally and in a written report. They will provide the supporting approaches and methods for the final opinion of value. Investing money, in a comprehensive, professional appraisal should provide economic benefit to the client. Regardless of the purpose of the appraisal, it will substantially justify the fee.
Peak Business Valuation would love to help you with a business valuation. We work with small business owners in a variety of industries. Questions are always welcome. Please reach out by scheduling a free consultation today!
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