If you are looking to sell your business in the near future (or to obtain an appraisal for estate and gift-planning purposes), then you will want to consider retaining the services of a qualified professional business appraiser to develop an independent “opinion of value” of the business. Assuming you decide to hire one, how do decide who to hire? And how much should you expect to pay?
There are various kind of appraisal and valuation experts. When selling equipment, you will want to look for an equipment appraiser; when selling real estate, a real estate appraiser. But when selling your business as a going concern, if you decide to have it appraised, you will want a business appraiser (also called a business valuation expert).
The most widely recognized accrediting organizations, and the initials representing the particular credential granted to a professional who has earned that organization’s accreditation, are:
|CBA||Certified Business Appraiser||Institute of Business Appraisers (IBA)|
|ASA||Accredited Senior Appraiser||American Society of Appraisers (ASA)|
|CPA/ABV||Certified Public Accountant Accredited in Business Valuation||American Institute of Certified Public Accountants (AICPA)|
|CVA||Certified Valuation Analyst||National Association of Certified Valuation Analysts (NACVA)|
To further evaluate the qualifications of the individual’s credentials, you may wish to understand the credentialing requirements of each organization.
Accredited Senior Appraiser (ASA). This designation is granted by the American Society of Appraisers (“ASA”). The American Society of Appraisers is a multi-disciplinary organization (including members in real estate, business valuation, fine arts, machinery and equipment and gemology), and requires passing an ethics exam and a course and examination on the Uniform Standards of Professional Appraisal Practice. www.appraisers.org
Accredited in Business Valuation (ABV). This designation is granted by the American Institute of Certified Public Accountants (“AICPA”). The AICPA is the national professional association for Certified Public Accountants in the United States. The additional designation of ABV requires that members hold a valid CPA certificate, and pass a comprehensive business valuation examination. www.aicpa.org
Certified Business Appraiser (CBA). This designation is granted by the Institute of Business Appraisers (“IBA”). The CBA designation requires members to hold a 4-year college degree or equivalent, successfully complete at least 24 hours of coursework offered by the IBA, and complete a CBA written examination. www.go-iba.com
Certified Valuation Analyst (CVA). This designation is granted by the National Association of Certified Valuation Analysts (“NACVA”). The CVA designation requires the successful completion of a Business Valuation and Certification course, written exam and (2) years experience as a CPA. www.nacva.com.
One should not presume that an appraiser who does not possess any of the above credentials is not qualified to perform the appraisal engagement. However, it may be a factor worth including as you consider who to hire.
Business appraisers with a professional designation must adhere to a code of ethics which requires “independence.” This means that the appraiser’s relationship with his or her client is not that of employee or agent. A professional appraiser is retained as an “independent” expert, and is to be an advocate only of his or her professional opinion of value. It is important to understand that this type of client relationship is different from that with the business owner’s attorney, accountant or business broker.
Of course, selecting a business appraiser will also involve comparative fee considerations. Most accredited appraisers’ fees probably average from $100 to $150 an hour. A written, formal appraisal report will typically cost at least $2,500 to $5,000 Performing the assignment will likely require 20–30 hours, resulting in a report totaling 15–50, or more, pages. However, depending on the purpose, scope and complexity of the assignment, the cost can easily exceed $10,000. If the purpose will support litigation, as in divorce or shareholder dispute resolution, costs may be significantly higher.
Ultimately, you will want to choose a credentialed appraiser best suited to your particular circumstances, for a cost-effective and affordable fee. The individual chosen should be able to clearly communicate his or her appraisal results, both orally and in a written report, including the supporting approaches and methods for the final opinion. Investing money in a comprehensive, professional appraisal should result in measurable economic benefit to the client, regardless of the purpose of the appraisal, that will substantially justify the fee.
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Mr. Lotzer’s specialized expertise includes Business Valuations, Business Plans, Marketing Plans, Industry Research and Financial Modeling. He is a Certified Public Accountant (WI License No. 5757) and also holds the Accredited in Business Valuations (ABV) credential issued by the AICPA exclusively to licensed CPA’s that complete their rigorous accreditation requirements. His professional affiliations include the…
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