Importance of Hiring a Quality Business Valuation Expert

Business Valuation

Companies have various motives as to why they undergo business valuation. Common reasons include the following: marital dissolution’s, shareholder disputes, goodwill impairment testing, exit planning, and for tax reporting purposes. After every business valuation, business owners will be able to know which parts of their business are at risk, where the sources of the company’s value are, and the measures on how to escalate the business’ value.

Not all business valuations are the same. Therefore, valuation professionals should be competent, conversant with the entire valuation process, independent, and astute, in order for the business valuation to be credible. There is an array of business valuation professionals that business owners can choose from. Since there is no ultimate entity that governs, manages, and oversees the entire valuation profession, it is only fitting that one employs or hires business valuation experts who are a good fit for the role or position. For instance, the National Association of Certified Valuators and Analysts (NACVA) administers the examination for Certified Valuation Analysts (CVA). In addition, the Institute of Business Appraisers (IBA) supervises the certification for Certified Business Appraisers (CBA) while the American Institute of Certified Public Accountants (AICPA) grants the credentials for the Accreditation in Business Valuation (ABV). Other professionals that business owners can trust and rely on during business valuation are Certified Public Accountants (CPAs) and Accredited Senior Appraisers (ASA).

Choosing Your Business Valuation Expert

A business valuation is performed by an accounting expert through a thorough examination of an entity’s documents, in addition to determining the worth of certain assets, potential future earnings, and current market conditions. Because of the fact that the opinion of valuation experts comes so strongly into play in making these assessments and determinations, there is a large amount of subjectivity involved in a business valuation. Numbers can vary from one professional to another. That’s why it is of paramount importance to hire quality business valuation experts.

  • Has the Expertise

Determining the worth of a business is a complex process; however for business owners, the end result is of utmost importance. It is the starting point for negotiations if the management or owners are looking to sell. It will also be the number they will employ to fairly dissolve a partnership. Conversely, if business owners are opting to expand, investors will want to see the work of an excellent valuation in a company.

There are different methods and mathematical formulas used in conducting a business valuation. Quality business valuation experts understand each of these approaches and formulas, and can therefore efficiently determine which will yield the type of results the management is looking for. In addition to having the right blend of knowledge and experience, quality business valuation experts will not take the entire valuation process lightly.

  • Can Accurately Estimate the Worth of All the Assets

During the early stages of the valuation process, business valuation experts will first look at all of the company’s financial transactions. They will also examine the company’s books and determine their past earnings, which go back several years. In evaluating the company’s assets, it will be difficult and challenging to place an actual dollar amount on some assets. However, a quality business valuation expert can accurately estimate the worth of all the company’s assets. This is a complex process and only skilled professionals have the ability and knowledge to come up with an accurate and definite number.

  • Knows the Company and Its Undertakings

One of the most important aspects of business valuation is projecting future cash flow. This is where the market conditions can come heavily into play. Opinions from business valuation experts regarding the manner in which the market will have an effect on the company’s future earnings will be greatly relied upon. Furthermore, if the company has done any expansions or added new products, a quality business valuation expert understands the role of these expansions or additions relative to the company and the market.

  • Conducts Site Visit

A quality business valuation expert regularly conducts site visits. This is important in valuing the business’ true worth. Through site visits, valuation professionals can physically observe and assess the subject under valuation and substantiate his/her notes and findings with the data acquired from interviewing the company’s key personnel and from financial records.

There are many complexities to a business valuation and much room for error. Hiring a quality business valuation expert will ensure that the company will get a fair and accurate value.