Hiring a Business Valuation Expert

Business Valuation

Conducting a thorough valuation of a business or other enterprise is critical to successful results. All too often, business valuation “experts” use a simple rule-of-thumb formula to do so, but this can lead to critical errors and misinformation. As such, the process of conducting a valuation of a closely-held business requires a comprehensive look at every aspect of a company in addition to the consideration of economic, industry, and other outside factors that could potentially increase or decrease an entity’s value. Satisfactory business valuation engagement involves the ability to account for great complexities and nuances, thus calling for a true business valuation expert who is properly trained and holds applicable appraisal qualifications.

Assessing credentials and accreditations is often the first step when hiring a business valuation expert. Some of the most vital credentials when looking for a business valuation expert include:

  • ASA: Member of the American Society of Appraisers
  • ABV: Accredited in Business Valuation – specialty credential issued by the American Institute of Certified Public Accountants (AICPA)
  • CVA: Certified Valuation Analyst – specialty credential issued by the National Association of Certified Valuation Analysts (NACVA), issued only to CPAs
  • AVA: Accredited Valuation Analyst – specialty credential issued by the National Association of Certified Valuation Analysts (NACVA)
  • CFA: Chartered Financial Analyst – specialty credential offered internationally by the American-based CFA Institute

Obtaining the expertise of someone with the above credentials lays the foundation for an accurate, successful business valuation. While this a great place to start, there are additional factors to consider when hiring a business valuation expert. An objective valuation from a qualified licensed appraiser removes the guesswork for business owners who are currently operating on an assumption of what their business is worth. As a business owner, not knowing the fair market value of your business could lead to a number of potentially unfortunate situations both now and in the future.

From income values to market competition to asset values, understanding the inherent benefit of an accurate and in-depth business valuation is the first step in hiring an expert. The following are the top 5 benefits to hiring a business valuation expert:

  1. Gaining a comprehensive understanding of your company’s assets that is precise, not an estimate – specific figures are critical to reinvestment purposes, insurance coverage, and the ability to sell the company for a profit
  2. Attaining an exact company value – using things like stock market value does not paint a full picture as to the true value of a company
  3. Proper setup for potential mergers/acquisitions
  4. Connection to more investors – with true facts and figures, seeking investors will be made much easier with a full company valuation report
  5. A full understanding of the company’s resale value

Engaging in a thorough, complete business valuation through the use of a true expert enables a company to set new goals, allow for accurate comparison of successes and failures through the years, and possibly pinpoint tax or accounting issues. All in all, investing in an accurate, exhaustive business valuation requires hiring a business valuation expert who is not only trustworthy, but has the right credentials, experience, and knowledge to successfully value a company.

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