When seeking to work with a business appraiser, business owners may frequently notice the CVA credential after their name. It is short for Certified Valuation Analyst. A CVA is a credentialed professional trained to perform a business valuation. For those asking, “what is a Certified Valuation Analyst,” the credential reflects specific valuation education, experience, and testing. Below, we explain what the CVA credential means and what these analysts do. We also cover when to hire a CVA and how to choose the right expert for your situation.
Peak Business Valuation works with business owners, buyers, and sellers across the country. Our appraisers hold professional credentials including the CVA, ASA, and ABV designations. We are happy to answer your questions about working with a valuation expert. Schedule a free consultation below to get started.
What Is a Certified Valuation Analyst (CVA)?
A Certified Valuation Analyst is a valuation expert who holds the CVA designation from the National Association of Certified Valuators and Analysts (NACVA). The NACVA awards the credential to analysts who show education, experience, and tested knowledge in valuing closely held companies. In addition, the CVA is the only valuation credential with outside accreditation. That accreditation comes from the National Commission for Certifying Agencies and the ANSI National Accreditation Board.
Understanding what is a certified valuation analyst can help business owners who need to find a business appraiser to work with. The CVA credential tells business owners that the appraiser is well trained in business valuation.
What Does a Certified Valuation Analyst Do?
A CVA determines the fair market value of a privately held business. The analyst then documents that conclusion in a written report. Below, we outline the main tasks a CVA performs during an engagement:
- Analyzing Financial Statements: The analyst reviews several years of income statements, balance sheets, and tax returns. Then, they make normalization adjustments to remove discretionary and one-time items. This ensures that earnings reflect ongoing operations.
- Researching the Market and Industry: A CVA studies recent sales of similar businesses. The analyst also reviews industry benchmarks and local economic conditions.
- Applying Valuation Approaches: The analyst considers the income, market, and asset approaches. From there, a CVA selects the methods that best fit the business. This decision depends on the purpose of the valuation and the details of the company.
- Assessing Risk and Value Drivers: Factors like customer concentration, owner dependence, and revenue stability influence a company’s worth. As such, a CVA measures these factors and reflects them in the conclusion of value.
- Preparing the Valuation Report: Finally, a CVA prepares a business valuation report. It explains the data, assumptions, and reasoning behind the conclusion of fair market value.
In each step, the analyst documents the reasoning behind the conclusion of value. The reader can then rely on the report to guide strategic decisions during a transaction, financing, or a legal matter.
What Are the Requirements to Become a Certified Valuation Analyst?
Understanding what is a Certified Valuation Analyst also requires understanding how someone earns the credential. NACVA sets specific qualifications for CVA certification. An applicant must meet them to qualify for the exam. The requirements cover education, experience, and reviewed work product. Below, we outline what a candidate must complete to earn the credential:
- Education or Licensure: A candidate holds an active CPA license. Another option is a business degree from an accredited college or university.
- Substantial Valuation Experience: Non-CPA candidates must show substantial experience in business valuation. That can mean two or more years of full-time work. It can also mean 10 or more signed valuation reports.
- A Reviewed Work Product: Each candidate completes a sample case study for peer review. A candidate may instead submit a sanitized fair market value report. That report must be prepared in the past 12 months.
- Professional References: Each candidate submits two professional and two business references.
- A Proctored Examination: Every candidate passes a five-hour, multiple-choice exam. It covers NACVA’s business valuation body of knowledge.
CVAs also pay annual fees and meet NACVA’s recertification requirements. As such, an active CVA designation shows that the analyst has kept the credential current.
When Should You Hire a Certified Valuation Analyst?
Owners should hire a CVA when a decision depends on a credible conclusion of value. Below, we outline six situations that commonly call for this work.
Buying a Business or Selling a Business
A business valuation gives a buyer or a seller an independent analysis of what the company is worth. Since each party often has different expectations, an outside conclusion of value promotes objective negotiations.
SBA Loans and Business Financing
SBA lenders often require an independent business valuation. This applies when a loan finances a change of ownership. The SBA recognizes the CVA for these valuations. As such, lenders may ask which designation the appraiser holds.
Estate and Gift Planning
A gift or an estate can transfer ownership interests. In these cases, tax reporting requires a supportable fair market value. A CVA can determine a reliable fair market value as of a specific date. This helps ensure compliance with IRS regulations.
Divorce and Litigation
When a business is involved in a divorce or litigation, courts and opposing counsel examine valuation testimony closely. A credentialed analyst can compile a report that withstands scrutiny in mediation, arbitration, or trial.
Partner Buyouts and Ownership Changes
A partner buying into or leaving a company is a common reason to hire a business appraiser. An independent conclusion of value helps the owners set buyout terms. Every party can then review those terms and move forward with confidence.
Succession and Exit Planning
Finally, owners planning a transition benefit from knowing what the company is worth. It is best to determine a company’s value well before the business changes hands. This helps owners take careful preparation to promote a successful exit. For example, a valuation identifies the value drivers and risks an owner can address before a sale.
If you are seeking a credible business valuation, it is important to work with a certified business appraiser. Peak Business Valuation can determine the fair market value of your company. Schedule a free consultation below to learn more.
How to Choose a Business Valuation Expert
The CVA designation is one of several qualifications that appraisers can receive. Moreover, there are various factors that influence whether an analyst fits your situation. Below, we outline what to consider beyond the credential when finding a business appraiser:
- Purpose-Specific Experience: The analyst should have experience valuing businesses for the same purpose as your engagement.
- Industry Knowledge: A qualified analyst should understand the value drivers in your industry. The analyst should also know the risks that impact those companies.
- Independence: The analyst should hold no financial interest in the transaction. The valuation outcome should not affect the analyst.
- Documented Methodology: The report should explain which valuation approaches the analyst considered. It should also explain why each one was used or set aside.
- Report Quality: The finished report should be clear enough for a lender, an attorney, or a court to understand it.
It is helpful to review these qualifications alongside the credential. This helps you select an analyst best suited to the decision at hand.
Conclusion
Knowing what is a certified valuation analyst helps owners, buyers, and sellers find a suitable analyst to work with. The CVA designation reflects formal education, verified experience, a reviewed work product, and a proctored exam. However, it is equally as important to consider the analyst’s experience, industry knowledge, and independence.
Peak Business Valuation is a professional appraisal firm. We serve business owners, buyers, and lenders across the United States. Our credentialed business appraisers can provide a credible business valuation to support a transaction, loan, or planning decision. Schedule your free consultation with Peak Business Valuation below to get started.
