- What should I look for in a business valuation firm?
There is a mix of attributes that business owners and their advisors should consider when hiring a business valuation firm. Education and specific training in business valuation are critical, but given the complexity by many business valuation assignments, credentials in business valuation represent only threshold requirements. The client must understand valuation approach and philosophies of business valuation firm. Firms that support their opinions with solid capital market evidence are in the best position to prevail in case the valuation is scrutinized. The business valuation firm should provide examples of their ability to analyze unique fact situations. The ability to produce well documented written reports for many engagements is also critical for some types of valuation projects, such as projects for federal tax purposes. Finally, clients should also determine whether the firm is responsive to client needs or do they look at projects as other jobs on their production schedule.
- How long does the process last?
Generally speaking, from 60 to 90 days after the business appraiser receives the requested information from the client. Requests for expedited service are considered on a case by case basis.
- How much does a business valuation cost?
Valuation engagements are priced on an individual basis depending on the specifics of the valuation and the timing of the project. Generally, costs for valuation projects begin in the $5,000 range and go up based on the complexity, timing and risk associated with an individual project. Importantly, the vast majority of valuation projects are based on a flat fee basis, providing comfort to a client that they know costs going into the project.
- Can my CPA value my business?
Yes, but only to the extent your CPA possesses both specific training and significant experience in business valuation are they qualified to value your business. Very few CPAs possess the necessary training and experience demanded by informed users of business valuations. Many CPAs prepare business valuations only as a small portion of their practice, making it difficult to achieve a basic level of proficiency. In addition, CPAs that focus on tax and auditing work have an orientation towards reporting historical financial information from a compliance standpoint, compared with business appraisers who focus on prospective financial information from an analytical perspective. Finally, although your CPA may meet the requirements of being independent from a professional standards standpoint, many frequent users of business valuations believe that using the company’s CPA who also performs a multitude of work for a particular client results in an appearance of lack of independence.
- Will the fees that I devote to the business valuation project be a wise investment of resources?
A well prepared business valuation is a central element in many transactions, as well as reporting, compliance and litigation matters. The costs involved with the preparation of a well-documented business valuation provide benefits that exceed the outlay of funds. A qualified business appraiser should be able to explain the benefits of a business valuation based on the specific intended use of the valuation.