What To Look for in a Business Valuation Professional

Buying or selling a business can mean beginning a long-awaited retirement filled with leisure, travel, and adventure or fulfilling an entrepreneurial dream.

Before doing either, it's crucial to have an accurate understanding of the business's value. 

Learn when, why, and how to hire a business appraisal service and what to look for in a business valuation professional.

When You Need a Business Valuation Expert

There are several situations in which you may require the expertise of a business valuation professional:

• Selling a Business: To ensure you receive a fair price for your business, it's vital to have a precise assessment of its worth.
• Buying a Business: When purchasing a business, an accurate valuation helps you avoid overpaying and ensures a sound investment.
• Litigation: A fair and unbiased business valuation is essential in cases of partnership disputes, divorce, or other legal matters.

Key Qualities of a Business Valuation Professional

When hiring a business valuation specialist, be sure to look for the following attributes:

Certification

Look for professionals with credentials such as CBA (Certified Business Appraiser), ASA (Accredited Senior Appraiser), or one of the certifications from other professional organizations such as ABV (Accredited in Business Valuation) or CVA (Certified Valuation Analyst). 

These certifications signify a high level of expertise and adherence to professional standards.

Independence

It's essential to select a valuator who is impartial and free from any conflicts of interest, ensuring the report's credibility.

Experience

A seasoned valuation expert should have a track record in your industry, proving their knowledge of the market and equipment used in your business.

Reputation and Confidentiality

Check online reviews and testimonials to gauge the expert's reputation among their clients. Maintaining confidentiality regarding your plans to sell or buy the business is critical.

Industry Knowledge

Whether the business in question is a metal fabrication shop, a manufacturing plant, or a dry cleaning business, determining the value of your equipment is important. 

A knowledgeable business valuation professional should be well-versed in how the equipment adds value to a company and generates income.

Costs of Hiring a Business Valuation Professional

Business valuation costs can vary widely due to a business’s complexity, the industry, the size of the company, and the level of detail required for the valuation report. 

Oral reports are less formal, do not require extensive documentation, and require less time. They’re generally less expensive than written reports, which include documentation and require more time and effort to produce. 

Costs can range from a few thousand to tens of thousands of dollars.

While the valuation is a factor in litigation, the costs rise with the preparation and documentation necessary and the potential need for expert testimony. 

The cost of litigation-related valuation can soar into the mid-five figures or more. Write out the project's scope and expected deliverables before hiring a valuation professional to ensure both parties agree on costs and timelines.

An accurate valuation is vital when buying or selling a business. The transaction will be less stressful when you know what to look for in a business valuation professional.

Business for Sale: 4 Steps to Take When Buying a Business

The trouble with a job is that you are forced to fight your way up a crowded corporate ladder. The next best idea is to build your own ladder and position yourself at the top. When you do this from scratch, it can cost a lot of money, and it is still quite an uphill battle to get the business viable. 

A third option is to buy a ladder that is already well-built around a proven business concept. So, with this in mind, here are four steps to take to purchase a business that already exists.

Look for the Right Business

One way to find a successful business for sale is to look around for an entrepreneur who is looking to retire. Generally, someone who has kept their business running for many years and has already made their money has gold to sell. 

Depending on how desperate they are to execute an exit strategy, you may even be able to pick up this gem of a business for a discounted price. If you have difficulty finding this kind of opportunity to seize upon, then you may want to contact business brokers to find out about businesses for sale that you may not have known were open to monetary offers.

Crunch the Numbers

Once you find what looks like the right business to purchase, the next step is to ask to see the numbers. All real business is done by the numbers, because figures and values that are represented by mathematically sound business formulas do not lie. 

When you can see that the price you are paying for an already viable business is not going to take much to gain a substantial return on your investment over a couple short years, then you will have a good idea of a timeline for how long it will take you to start generating significant profit with your newly owned, fully established business model.

Negotiations

Once you have a thorough grasp of the numbers and you know what the current owner wants to sell their business for to complete their exit strategy, then the next step is to engage in negotiations. 

While the current owner may have a price they want, this does not prevent you from making a lower offer. Hey, it is just business, nothing personal. As a prospective business owner, you should protect your bottom line and get the best deal possible for the right price. 

The business assets you are buying may be old and in need of some repair or other reasons may legitimately drive down the original owner’s asking price. It is okay to be fair with your counter offers and site legitimate concerns, but try to not be too unreasonable.

See the Plan of Action

Once the numbers and negotiations make sense, then the next step is to talk strategy with the person from which you are buying the business. To be clear, this individual is still in business, after all these years, because they know what works and what does not work. 

You want to get this individual to agree to mentor you in their business strategies for success. This has to be part of the purchase deal, this way you will be able to continue to use their proven business strategy the way they have always done it. 

So, you are not just buying a business, but you are buying rights to the vision and strategies used to make this business a success.

Conclusion

You are the proud owner of a well-established business. You have quality plans, quality employees and the insight to continue in the former owners footsteps towards success. 

The important thing is that you did not have to guess at how to reinvent the wheel to get to this point either. You did it all the smart way by purchasing a business that already had a proven track record.