At some point in time during your business’s “life” the question will be asked. Personal circumstances will vary however it is inevitable someone or another business will want to know. Knowing the value of your business can aid in strategic planning or personal/family wealth planning. The value of your business is powerful information especially when it comes to decision making. Some broad areas and reasons why a valuation expert should be engaged includes estate and gift planning, litigation, financial reporting, strategic planning, mergers and acquisitions, among many others. Situations where a business valuation is needed are outlined in our list of services.
Why should I have my business valued?
Who usually hires you and how is the process coordinated?
Almost all of the time we hired directly by you, however many time the introduction to our services is made possible by your (or friend who is an) accountant, attorney, boards of directors/advisors,other business owners, CFOs, controllers, estate executors, exit planning professionals, financial planners,bankers, private equity groups, and venture capital groups.
For tax related valuations, such as gift or estate tax, we can work directly with the client’s trusts and estates (T&E) attorney to begin the process of identifying what is being appraised, the date of the valuation, and the purpose. We then work directly with the company’s owner / accountant/CFO and controller.
What is the difference between an appraisal, a valuation, and an evaluation?
Nothing really.Although an evaluation is not a commonly used term all of the terms have been used interchangeably.The more common used terms are appraisal or valuation – in short it is the act or process of determining the value of a business, business ownership interest, security, or intangible asset.
When I hire an accountant, I typically expect that s/he is a CPA. What do I look for in hiring a business appraiser?
Professional designations and experience are some of the most important factors to consider in selecting a business appraiser. It is not common knowledge of what it takes to be competent at appraising businesses, especially smaller, privately owned ones.
Some professional designations are more difficult to obtain than others. And while there are various designations available to professionals the amount of experience in the profession and the amount of time spent doing valuation is just as important if not more in certain cases.
Can I have my company’s CPA value my business instead of hiring an independent business appraiser?
If your CPA has received formal training in business valuation (including the particular situation at hand), they do this work on a regular basis and there will be no perceived conflict of interest in the situation for which you are getting your business appraised, no problem.
However, while most CPAs have achieved a high level of competence in accounting and/or tax matters, the vast majority of CPAs do not have the necessary expertise and training to value a business. In fact, as an illustration, only about 4,200 (as of January 2015) of approximately 400,000 CPAs in the country (about 1%) have earned the Accredited Business Valuator designation awarded to members of the AICPA who have passed a rigorous exam and have demonstrated involvement in at least ten appraisals.
Accounting and appraisal skills, although overlapping, are fundamentally different. Generally speaking accountants are trained to focus on historical information. Appraisers look forward as well as sideways at comparable businesses in the marketplace in order to help assess the value of your business.
Throughout most valuation engagements, we work closely with our clients’ CPAs (as well as attorneys and other trusted advisors) to ensure a complete and thorough appraisal of your business.
How long should it take to get my business appraised?
Depending on need, scheduling, availability of information, cooperation of management of the company being valued, type of report required, it typically takes about 4 to 8 weeks to render a documented opinion of value. However many times a full appraisal is not needed; as a result when we are hired as a consultant that time frame can be accelerated.
How much does a business appraisal cost?
It depends . . .The breadth and depth of the work that you require, the purpose of the appraisal,the availability of information and the complexity of your business are the most important factors in determining cost. Our work may vary from a several hours to more than 100 hours of time. Based on discussions with you, or your advisor, accountant or attorney, we can prepare either estimates of time or fixed prices to prepare the report you need.
“It is unwise to pay too much, but it is worse to pay too little. When you pay too much, you may lose a little money — that is all. But when you pay too little, you stand to lose everything, because the thing you bought was incapable of doing the thing it was bought to do. If you deal with the lowest bidder, it is well to add something for the risk you run; and if you do that, you will have enough to pay for something better.” (John Ruskin,the leading English art critic of the Victorian era)
We can be hired as consultants to advise on a number of business valuation and related issues or to be an expert witness and prepare a detailed report. That being said we have provided clients with assistance for as low as $1,000; and many time a formal detailed report is not required. So it really does depend – please call to talk with one of our professionals.
Do you provide real estate appraisals or valuations of other fixed assets?
Many times the value of real estate or other fixed assets are necessary to complete the project. Although we do not perform appraisals of real estate or other fixed assets, we have strong relationships with many excellent appraisers who specialize in these areas. We work with them on a case by case basis to complete the necessary analysis.