Step 1 is for the Valuator to draft an contract detailing the terms of the 'valuation engagement'. The following information should be in this 'engagement letter':
Step 2 - Information Gathering
The valuator will request information including financial statements and/or tax returns for three to five years, facility leases, contracts with suppliers and customers, product information, royalty agreements. Depending on the purpose and interest being appraised, corporate documents such as shareholder and partnership agreements may be needed.
Step 3 - Interviews and a Visit to the Business
Usually after a review of the Company's financials and product information, an owner of manager of the company is interviewed to fill out the valuators knowledge of the business. This interview is usually carried out onsite in order to give the analyst a look at the business.
Step 4 - Analysis
The valuator takes all available information and through a process of calculation and reconciliation comes to a conclusion of value. Depending on the purpose of the valuation, the conclusion may be a range of values.
Step 5 - Writing the Report
If the client requests it, we will provide bound copies, but most of our clients find the receipt of a .pdf report to be more convenient and useful.
Note: Appraiser, valuator, and analyst are all synomynous in the context of business valuation.
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