| At some point most business owners will
need to find out how much their business is worth. They will be faced with the task of
finding someone to perform a business appraisal or valuation. In such unfamiliar territory
owners often don’t know where to start.
Types of Business Valuation Professionals
They are a number of professions that offer business
valuation services. In most areas there is no specific regulation of this profession.
Business valuation services are not usually a primary source of revenue, so locating
business valuation professionals can be difficult. Here are some types of professionals
that commonly offer business valuation (BV) services.
1. CPAs:
Many CPAs offer BV services in addition to their normal
accounting, auditing, and tax work. CPAs often have a combination of business, accounting,
finance, and tax knowledge that is well suited for valuing businesses.
2. Financial Consultants (non-CPA):
Financial consultants have varying levels of expertise so
their backgrounds should be checked carefully.
3. Business Brokers:
Brokers normally stick to valuing the businesses they have
listed for sale. They tend to rely on ‘quick and dirty’ methods that work well
for determining asking prices, and are not intended to be formal valuations.
4. Commercial Real Estate Brokers/Agents:
Commercial real estate professionals sometimes value
businesses they list for sale. They are good at appraising real estate, but typically lack
the skills and experience to properly value intangible assets like goodwill.
No one type of BV professional is inherently better than
another. Examine each professional’s qualifications carefully.
Business Valuation Credentials
There are four major organizations that offer business
valuation certifications. Each certification has unique prerequisites and renewal
provisions. They all require membership in the granting organization.
1. The American Institute of CPAs (AICPA)
grants the Accredited in Business Valuation (ABV) credential that requires being a CPA,
passing an exam, and BV education and experience. Their online ABV directory can be
accessed at www.aicpa.org/accredrefweb/abvsearch.asp
2. The American Society of Appraisers
offers the Accredited Member (AM) and Accredited Senior Appraiser (ASA) designations that
require passing exams, and BV education and experience. Their online member directory can
be accessed at www.bvappraisers.org/find/.
3. The National Association of Certified Valuation
Analysts (NACVA) offers several designations including the Certified Valuation
Analyst (CVA) that require passing an exam and BV education. Their online member directory
can be accessed at www.nacva.com/US_guide/US_guide.html.
4. The Institute of Business Appraisers
offers several designations including the Certified Business Appraiser (CBA) that require
passing an exam, and varying degrees of BV education and experience. Their online member
directory can be accessed at www.go-iba.org/directory.asp.
Just like the types of professionals, no one BV credential
is inherently better than the others. Having a BV designation is not a guarantee of
competency, but it does demonstrate that the professional has met the minimum requirements
for that credential. Conversely, the absence of one doesn’t prove incompetence. It
does raise the question of why the professional does not have one. Many BV professionals
have multiple designations. That’s great, but one BV credential is enough.
Searching the member directories of these organizations is
the best way to find BV professionals near you. Business Valuations & Strategies
maintains links to all four directories in one convenient location at
www.bus-val-strat.com/Search BV Professional.htm.
Business Valuation Experience
The first question many business owners ask a BV
professional is whether they ever valued a business like theirs. Although that is a good
question, it misses the point. Regular and recent BV experience is much more important
than specific industry experience. BV procedures are generally the same regardless of the
industry or type of valuation. BV professionals are good at research and have many
excellent resources to learn the ins and outs of most industries.
Ask to see samples of their business valuation reports. You
may not understand some of the real technical stuff, but you should be able to make sense
of what was done and why. The valuation result or conclusion should also make sense to
you. The best BV professionals in the world are worthless if they can’t write a
report that can be understood by non-financial people.
Final Selection
Hopefully you have found more than one qualified BV
professional to choose from. Each professional should be personally interviewed and
questioned about fees and turnaround time. After the interview select the most qualified
professional that meets the rest of your criteria. A checklist or scorecard that lists
each important factor and rates each professional on every factor can help make the
process less confusing and more logical.
Looking for a qualified professional to do a business
valuation is not easy. If you take some time, do some research and approach it
systematically, you will find a qualified professional that is right for you. |
