The goal of a business appraisal can be stated very simply: setting a dollar figure on the value of a business. Getting to that final step is, however, anything but simple.
Business valuations involve a complex series of investigations, extensive research of the company, the economy and the industry in which it operates, and careful analysis of the information obtained. The financial affairs of the company must be fully analyzed. Data on transactions must be collected, analyzed and correlated to the subject business. And then it takes something more: a healthy measure of professional judgment, that extra sense that tells an appraiser which valuation approaches have greater merit, which questions to ask to get the whole story, and which answers carry greater weight.
Business appraisal is an inexact science. There are no canned formulas, no hard and fast rules, no automatic answers. The appraiser’s judgment often has a major impact on the valuation conclusion. Informed judgment, that sixth sense, comes only from years of experience, training and full-time dedication to the profession. It’s why business valuation is best done by a specialist. The specialist is continuously exposed to a broad spectrum of industries, company sizes and states of financial health, and routinely takes such factors into account in the valuation process. The specialist is able to keep abreast of recent court rulings, current requirements and practices of the Internal Revenue Service and other agencies, and the methodology, format and language that each agency is accustomed to.
The depth of experience that a specialist brings can be particularly important if litigation is involved. The valuation conclusion of the opposing sides may sometimes be very different indeed, and large sums of money often rest on the qualifications of the appraiser and the thoroughness of his presentation.
Because of their experience, the specialist can provide a more accurate, more cost-effective appraisal than someone who does business appraisals as a sideline.
The need for a professional business appraisal may arise only once in the lifetime of a business. But when it does, the reason is usually pivotal, and the outcome is usually critical.
It’s worth having it done right.
It’s worth a specialist.
