Business Valuation - How to find the right Professional

At some point most business owners will need a business valuation 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 Valuation Professionals

There are a number of professions that offer valuation services. In most areas there are no specific regulations of thisprofession. Valuation services are not usually a primary source of revenue, so locating suitably qualified 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 havevarying levels of expertise so their backgrounds should be checked carefully.

3. Business Brokers. Brokers normally stick to valuing thebusinesses they have listed for sale. They tend to rely on "quick and dirty" methods that work well for determining askingprices, and are not intended to be formal valuations.

4. Commercial Real Estate Brokers/Agents. Commercial realestate professionals sometimes value businesses they list forsale. They are good at appraising real estate, but typicallylack the skills and experience to properly value intangibleassets like goodwill.

No one type of BV professional is inherently better than another. Examine each professional’s qualifications carefully.

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 AccreditedMember (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 isinherently better than the others. Having a BV designation isnot a guarantee of competency, but it does demonstrate that theprofessional has met the minimum requirements for thatcredential. Conversely, the absence of one doesn’t proveincompetence. It does raise the question of why the professional does not have one. Many BV professionals have multipled esignations. That’s great, but one BV credential is enough.

Searching the member directories of these organizations is thebest 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 professionalis 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 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.

About The Author:
David E. Coffman is a Certified PublicAccountant (CPA) who is Accredited in Business Valuation (ABV)and a Certified Valuation Analyst (CVA). He authored the Guideto Selecting the Right Professional to Value Your Business tohelp small business owners through this process. The Guide isavailable at http://select-bv-prof.com

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