Most homeowners wouldn’t appraise their own house before selling it. When it comes to appraising your company valuation, should you work with a business valuator to determine its economic worth?
You might choose to have this service in the following scenarios:
The bottom line is, you want an objective valuation of your company. You might have years of experience running it, but what you don’t have is the ability to see what it is worth to buyers.
That’s where a business valuator steps in. How do you ensure that you’ll work with the right one?
Keep an eye out for these attributes when choosing a business valuator:
Selling your business is a major financial decision; you want to make sure that this task is in the hands of someone with expertise and credibility.
Company valuation in the technology industry is a lot different than with a law firm. Assessing the size and complexity of your business is one thing, but it’s another to consider the niche it has in the marketplace. The more specialized that your services are, the more important industry experience becomes.
We recommend doing your research before selecting which business valuator to work with. To get an idea of this individual’s general conduct, start by searching their name on Google. When their business appears, check the online reviews left by previous clients.
If a business valuator has a few negative reviews, it doesn’t mean you have to write them off completely. Keep in mind that people who’ve had positive experiences are generally less likely to leave reviews, so take reviews with a grain of salt.
If you don’t know how to value your business, you aren’t alone—that’s what a business valuator is for. The one you choose to work with should have a four-year college degree in business.
More importantly, you want someone with years of experience working in the industry. Someone who’s just beginning their career may lack the foresight and industry knowledge to provide a comprehensive valuation of your business. Instead, you might choose to work with an accredited Chartered Business Valuator (CBV).
Business valuators need to assess and balance a mix of factors when determining an asking price. They include:
Different business valuators will use varying methods to calculate these factors. What they’re looking for is the rate of return that a new owner could expect. How many years will it take before they make a return on their investment?
The more credentials that a business valuator has, the more their services will cost. But keep in mind that an accurate valuation can make or break a sale. The business valuation often directly affects the time it takes to sell a business.
If the business valuator has any stake in the outcome of the appraisal, it jeopardizes the integrity of their work. You want a third party who has no bias or personal investment in it to look at your company. Preferably, this is someone who is not related to any of your employees or affiliated with your competitors.
If confidentiality is a priority to you, you may ask them to sign a NDA when you begin working together.
Having a business valuation can help with financial planning, tax preparation, and selling the company. Regardless of the reason, we suggest working with an experienced and accredited business valuator. This will ensure that you receive a thorough, accurate, and impartial appraisal of your company.
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