FREQUENTLY ASKED QUESTIONS

Thorough, detailed, defensible work. A certified business appraisal report that will withstand IRS scrutiny. Defensible data that other appraisers will support, and a report that can be used with confidence.

A useful litmus test is to use the same criteria used by the SBA (Small Business Administration) to designate what it refers to as a “qualified source.”

This criterion identifies someone who regularly receives compensation for business valuations. The SBA identifies the four leading accreditations as ASA, CBA, CVA and ABV.

The SBA also suggests that the party retaining the appraiser should be sure that a distinction is drawn between the experience in valuing small business as opposed to large business, given the different issues involved and skills required. The appraiser’s prospective client should also be confident that the appraiser has the resources, the professional contacts, and expertise at his disposal to create a thorough report.

Years ago, Sir Hugh Rigby, Surgeon to Great Britain’s King George V was asked, “What makes a great surgeon?” Sir Hugh said, “There isn’t much to choose between surgeons in manual dexterity. What distinguishes the great surgeon is that he knows more than other surgeons.” The same holds true for appraisers. A benchmark for this knowledge is the number of professional accreditations earned by the appraiser.

While you have retained the appraiser’s professional services, you are not entitled to expect the appraiser to advance your objectives or to support your position. The appraiser’s allegiance is to objectivity and accuracy. Because of this, you can expect a professional appraiser to provide you with valuations that will be supported. This position of independence, which may be interpreted as detrimental at the outset of an engagement, means that the appraiser inevitably serves the client’s best interest by producing a report that earns acceptance.

Essential information includes a summary of the company’s history and operations. This information should be put in context with industry specific analysis and appropriate financial data pertaining to the market in which the business operates, along with regional and national economic analysis.

The appraiser should be sufficiently knowledgeable to be able to specifically identify the ways in which economic factors and market conditions impact the value of the business, and explain the methodology used to arrive at this determination.

In certain instances, such as SBA business appraisals, it may be appropriate for the appraiser to analyze the details of unique contractual terms and conditions. This could provide insight into the differences between an asset sale and a stock sale.

Before the appraiser is formally engaged, communicate your objectives so that the appraiser has the information needed to create a “scope of work” document. Along with the specific types of information, insight and analysis the report will offer, fees and deadlines are each memorialized as well.

Send me an email or give me a call at (480) 857-7449. I will listen to the type of valuation or appraisal project you are looking for, understand your objectives, and suggest the best steps for us to take to move forward.