The Complete Guide on How to Choose the Best Business Appraiser

Who is the Best Valuation Company for Your Engagement?

Regardless of the reason, once you hire an appraiser for their business valuation services, you need to ensure you get the best. This appraiser’s judgment will dramatically impact your business and future. How do you find the best business appraiser to meet your needs?

What Is the Purpose of Your Business Appraisal?

Before you start looking for a business appraiser, you need to ask yourself some questions. The first question, of course, is what you hope to achieve. Are you looking for a valuation to raise equity? Do you want to sell your business to your children?

If you’re selling your business, do you want to find the highest bidder, or would you take less money if it meant that the person stepping into your shoes better understands your business?

This question is more important than you may think. You would think that getting the most money would be the goal of any business owner. You have put years of sacrifice into the business. The last thing they want is for their business to fail the minute they walk out of the door. If the business is a small operation, there’s a good chance that the owner has built relationships with the employees. They don’t want their former associates to be out of work.

A Business Valuation for Buying a Business

If you’re buying a business, you want to know the seller’s motivation and find a way to lower your initial investment. Either way, the goal is to get the fairest market value for your money. Sure, you want to spend less money, but there’s a difference between wanting to buy a company to run and grow and buying one to sell for a profit in five years.

Be upfront with the business appraiser. Tell the business valuation expert your motivations and give them a clear sense of your goals. Help them understand the true cash flow of the target business. Do you own real estate? We can include your real estate appraisal as part of our valuation report.

Does the Appraiser Understand Your Industry & Market?

To get the most accurate appraisal possible, you should look for someone with experience in your market. It would be hard for someone in Florida to appraise a business in Los Angeles and vice versa. The best-certified business appraiser considers your local market. Does your business meet the needs of local customers? Is it positioned inside of the community to continue growing? Is your local market expected to grow or decline over the next ten years?

These questions give appraisers context as part of their business valuation services. To answer them, they need to understand your local area. Make sure you hire someone who has worked within your state and, if possible, your city.

Choose the Best Valuation Service, Not the Lowest-Priced Business Appraisal

The cost of a certified business valuation, by an accredited Business Appraisal FL|GA|HI team member varies based on what your goals are and how in-depth the appraiser must go. If you’re a small business with six employees, you’ll pay less than a regional company with locations throughout Florida. It would help if you had a rough estimate of how much money you plan on spending after your first meeting with a business appraiser professional.

Some appraisers specialize in small businesses, others in large corporations, and some business valuation firms have people for both. If you run a small business, that doesn’t necessarily mean you’ll pay less. There are dozens of variables to consider. While you might find it tempting to use the cheapest service, look for someone who understands your market and needs. Getting a rushed appraisal to save a few bucks can hurt your business in the long haul.

Make Sure They Have Valuation Experience in Your Industry

Every type of business is different, and appraisals should reflect that. For example, one of the most valuable things an online business or tech startup owns is its email and contact list. The amount of data a website accrues determines a large part of its value. For a chain of restaurants, however, the equipment and physical locations will take precedence over the number of people on its mailing list.

When you hire a business appraiser, find out if they’ve previously handled businesses like yours. If you run a clothing store, you want them to have retail experience. If they don’t, how can they accurately value your inventory? The same goes for other industries as well when choosing a business valuation firm.

When working with a company, you should also ensure that they have a diverse team. You want a company that employs CPAs, accredited or certified business appraisers, CVAs, and AVAs so that they can meet your needs in-house. Investment banking experience, intellectual property valuing, estate planning, estate taxes, and dealing with private equity are valuable for business owners of large company.

Evaluating and appraising a business requires a set of skills that a CPA might not have. Still, the CPA will understand the tax implications of your financial records better than the average appraiser. Pulling on both of their experiences gives you a complete picture of a business before deciding on your next step when choosing a valuation company.

Choose A Business Appraiser That Meets Professional Valuation Standards

When you hire someone to analyze your business, you want to ensure they meet specific professional standards for business valuation services. Questions to ask of a certified business valuation company include their adherence to IRS, AICPA, and NACVA standards, especially if you’re getting a business appraisal for tax reasons.

If you plan on transferring or selling your business to your children or other family members, hire a Certified Succession Planner (CSP). These business valuation professionals can help you develop and implement a comprehensive succession plan, develop an action plan to handle succession assets and liabilities, and determine the capability of those to whom you intend to hand the business. They will also help you see any problems in advance.

Hiring a company that can meet all these business valuations standards is your best bet. If you develop a relationship with a professional business appraiser early on, they can help you with the decision making throughout your company’s life cycles, from financing to succession planning to dealing with private equity.

Do They Respect Your Confidentiality?

If you plan on selling, buying, developing a succession plan, or financing, you don’t want everyone to know. You need a business appraiser who will respect your confidentiality. If you choose, seek someone to prepare a non-disclosure agreement during the first meeting.

We also have a due diligence valuation checklist you can use.

You’ll also give the appraiser access to your financial documents and other important information about your business. In many cases, this information will have sensitive data involving customers. Since most data and financial documents are online and computer-based, determine what steps the appraiser takes to protect this information.

Feel free to ask any questions you have in the initial conversation. How will they ensure your employees don’t find out about your appraisal? How will they use the information you provide them? The answers to these questions will tell you if they take your security and confidentiality seriously.

Also read: business appraisals for mediation and legal disputes

Ask About Their Business Valuation Experience

The best business appraisers have dealt with multiple types of businesses. They know how to deal with any situation that might arise and have the experience needed to evaluate data quickly and accurately. You don’t want to hire someone to evaluate your business if they are new.

Look for a company that has been in the industry for at least a decade, if not longer. Find out how many appraisals and valuations they’ve done in general and your industry. Don’t leave your business’s future in the hands of someone just getting their feet wet.

Find Out If Their Valuation Work Has Passed Reviews from Outside Parties

The last thing you want is to pay for an appraisal that will not stand up in court or with the IRS. Look for a business appraiser whose work has been tested in courts with the IRS, the SEC, or the Department of Labor. If their evaluations stand up to scrutiny, you know that you’re safe.

On day one, you should also ask the appraiser an important question: are they willing to tell you what you don’t want to hear? As nice as it would be to get a higher-than-expected appraisal of your business, accuracy should always be your number one priority. Be able to prove your cash flows for the business valuation firm, private equity, and their lenders.

Read our guide on choosing a business valuation firm wherever you are in the United States.

Business Appraisal FL|GA|HI Has the Experience You Need

When looking for the best business appraiser, there are many factors you will need to consider. These are industry experience, certifications and credentials, and their understanding of the local market. You can gauge and choose the best business appraiser for your needs when picking a business valuation expert.

BA FL|GA|HI has over twenty years of experience valuing businesses. We have business valuation experts who can give you an honest, quick, and confidential appraisal no matter what industry your business operates in. Whether you run a small store or a large company, we can meet your specific needs.

No matter the reason you need a business appraiser, we will work quickly and hard to deliver you results you can trust. Contact us today to get started!

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