How to choose the right business valuation firm
Table of contents
- How to choose the right business valuation firm
- How to select a business appraisal firm?
- There are several factors to consider when choosing a business valuation firm.
- What next steps should I take when choosing a valuation firm?
- What else should I look out for?
- Can I use a free online business valuation instead?
- Due Diligence on Business Valuation Companies
- Business Valuation Firm Conclusion:
Operating a business can be extremely rewarding. For some, it represents an opportunity to build wealth when you sell your business. It might be a trial of leadership for your family. For many, it is a chance to build a legacy for generations to follow. Valuating your company is the first step to determining its worth and confirming your wealth. Use our valuation advisory services.
Irrespective of your business motivation, it’s important to evaluate its market worth. Get a professional and certified business valuation to determine your firm’s value.
As a result, it is important that you perform thorough research before selecting an accredited business valuation company to work with, and your business appraisal services need to ascertain the right market value of your company.
What is a business valuation firm?
A business appraisal firm, like Business Appraisal FL|GA|HI, is a company that specializes in estimating the value of any size business. These appraisals are useful when a business owner seeks financing, is drafting an exit plan, or considering a potential sale, among other reasons.
Business valuation firms conduct appraisals by employing a variety of methods, including conducting financial analysis of future earnings, future cash flows, market research, and comparable transactions.
Many times, business appraisal firms will also offer other advisory services, like M&A, litigation support, estate planning business valuations, Internal Revenue Service work, or purchase price allocation services.
How to select a business appraisal firm?
There are several factors to consider when choosing a business valuation firm.
- Firm’s experience: When selecting a firm, make sure they have experience in appraising comparable companies in your industry. It’s important that they understand your industry and have expertise in the specific area you need a valuation for, such as estate and gift tax purposes. This will ensure a fair and accurate business valuation, like the valuation specialists at Business Appraisal FL|GA.
- Reputation: Analyze the firm’s reputation to confirm that the firm is reputable and has a good track record. If the valuation is for tax reporting purposes, make sure their work is to IRS standards.
- Fees: The price of professional valuations varies by firm. The cost may vary based on company size, purpose, valuation methodology, and operational complexity. Ensure the firm you choose has reasonable fees that align with their services and expertise. Very small businesses should pay less than $3700. You can read our article on value costs.
Considering these factors will help ensure that the valuation expert company you hire meets your business needs and achieves your firm value goal.
What next steps should I take when choosing a valuation firm?
When hiring a business valuation firm, consider factors such as referrals from friends, family, and business associates, as well as online searches. Seek referrals from professionals like business owners, tax planning lawyers, private equity, real estate appraisers, and SBA lenders.
At that point, feel free to contact the firms directly to get more information. Be sure to ask them about the methodology they employ to value the business.
Additionally, this is important because you should be comfortable with the firm’s methods, valuation expertise, and business valuation services.
What else should I look out for?
A certified business valuation by an accredited BA FL|GA|HI team member is a top-notch service that every business owner should seek when planning to obtain a company valuation.
Differentiating factors set business appraisal companies apart in terms of efficiency, experience, credentials, pricing, and service.
Here are some additional factors you should keep in mind as you choose a business valuation firm.
- Make sure the firm is licensed, accredited, and insured. A certified business valuation by an accredited business appraiser should be your utmost priority. Accreditation validates the experience and knowledge that an appraiser has. These factors are required to deliver reliable and quality business valuations. An accredited senior appraiser is involved in every Business Apprasial FL|GA|HI job.
- Ask for a fee estimate before hiring the firm. Request a brief review of your financial statements. This includes the balance sheet, income statement, net income, cash flow analysis, growth rate, and latest tax returns.
- Inquire if the valuation services include a detailed explanation of the valuation report and a walkthrough of the valuation methods used. Make sure there is a sample valuation and CV available for business owners and advisors to review.
- Business Valuation Methods Used. Business Appraisal FL|GA will always use at least six methods. This including book value, the asset-based valuation method or liquidation value, the discounted cash flow analysis, and the market value method, to determine the fair market value of a business. Your business is more than just a PE ratio and business valuation experts should understand that.
Can I use a free online business valuation instead?
Many online services, relying on formulas and calculations, offer quick valuations — some done in under thirty minutes. Business valuation platforms use user-provided metrics for assets, financial reporting, capital structure, industry, value drivers, and growth prospects.
The problem with this approach, however, is that many individuals tend to be biased and overestimate their own assets’ worth. That’s because they may have an unrealistic idea of how much their company is worth based on their financial statements. This often results in an overinflated valuation from sources that claim to provide accurate assessments of your total market capitalization.
Due Diligence on Business Valuation Companies
Moreover, many of these applications ask for financial information, like profits and losses. Individuals filling out the form may fail to answer the questions correctly. We understand you are not one of our investment banking, hedge funds, or private equity clients with huge management teams.
This often happens when discussing technical topics, such as estimating earnings adjustments or calculating a profits multiplier for their company. Inputting values based on pure estimates or guesses will result in an inaccurate appraisal that requires further clarification. You will see discounted cash flow analysis (DCF) that doesn’t make sense from the free online valuation tools.
For business owners to obtain the most accurate appraisal possible, experts advise hiring a CVA-accredited valuation firm like BA FL|GA|HI. Refer to our guide on choosing a business valuation company to understand the value of a company or its enterprise value.
Business Valuation Firm Conclusion:
Choosing a business valuation firm is an important decision. This is because valuation is the process that impacts the future of your company and your exit strategy.
The value of your business can vary greatly depending on the appraiser’s expertise and approach. To get the best valuation and understand the process, follow the tips mentioned above.
With offices across the US, BA FL|GA|HI can provide certified business valuations to meet your needs in terms of time, audience, and budget.
Choose a qualified firm, like BA FL|GA|HI, to accurately and professionally appraise your company. Our firm consists of a certified team of accredited business appraisers with valuation experience who are eager to value your business.