Need a Business Valuation?

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':

  • The client. The client may be the owner, the corporation itself, or an advisor such as attorney, accountant, or banker.
  • Type of Report. A report can be a relatively short 'summary report' (20 to 40 pages), a 'detailed report' (40 to 80 pages), or if all that is desired is the conclusion, forgo the written report and request an 'oral' report which would include a presentation by the analyst.
  • Identification of the Valuation Subject. This may be some fraction of the shares in a company, 100% of the shares in a corporation or partnership, or the collective operating assets of the business.
  • The 'Standard of Value'. Usually 'Fair Market Value' but depending on the purpose of the valuation other standards such as 'Fair Value' or or a subjective standard such as 'Probable Selling Price' or 'Investment Value' may be more useful to the client.
  • An estimated delivery date for the finished report. A valuation for an SBA 7(a) loan is necessarily in the "critical path" of a business purchase. It is prudent to get a commitment from the valuator if "time is of the essence" (when is it not?).
  • The Terms of Payment.

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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