FAQs

In general, both of these terms represent an opinion of value. Both of these terms are used interchangeably by financial services professionals.

Yes, there are multiple standards of value including fair market value, fair value, and investment value. The right standard of value for your business depends on your purpose and the intended use of your valuation (i.e., the applicable legal jurisdiction).

Typically, business valuations use fair market value for the selling/buying transaction. It’s the price that both parties have agreed to willingly.

Almost any business entities can be appraised including S and C corporations, Limited Liability Companies (LLCs) and Partnerships (LLPs) and Sole and General partnerships.

If you already have a buy-sell or shareholder agreement in place, we can review this determine your value interest. However, if this agreement does not exist, we recommend that you seek a business valuation that will be defined and agreed upon by all involved parties.

Yes, there are. These include an asset-, market-, or income-based approach. Different approaches work best for determining the value of your entire business or various parts thereof such as business ownership interest, security, or intangible asset, or more.

The asset-based approach calculates accumulated value over time by using your company’s underlying assets and liabilities.

The market-based approach uses the principle of substitution by reviewing other investments with similar traits as the investment you are considering. Then, the values are tested in the marketplace.

The income-based approach computes a company’s earning capacity. This is achieved by creating a forecast of your company’s anticipated bottom-line profit 5 years in the future. Then, we work backwards from your forecasted future profit, via a process called discounting, to arrive at the present-day worth of your business.

Unfortunately, a CPA cannot appraise your business as they don’t have the in-depth training required to provide an accurate valuation. Instead, you’ll need to find a certified, independent business valuator with experience in your industry area.

Ironically, no. The reason being is that the value is essentially an opinion, not a fact. Because of this, a valuators training and experience play a large role in generating an accurate valuation.

There’s plenty of people who might offer to value your company such as accountants (see above), business brokers, business advisers and even real estate agents. However, despite industry knowledge and experience, they do not receive the same training or experience as a business valuator. This means the chances of receiving an accurate valuation are low.

Using an inaccurate valuation carries certain risks. Being overvalued results in paying more taxes or being disregarded by potential buyers and investors. Getting undervalued makes you easy prey for the shrewd investor looking to capitalize on your ignorance. Statistically, people’s expectations of value are off by an average of 27%. A valuation is small price to pay to get it right.

Yes. Getting an accurate answer is more complex and time consuming than most people think. An accurate value determination requires careful analysis of assets, a keen understanding of the business and industry, and the application of the most appropriate methodology (from the many available) to arrive at a calculation of value. We recommend looking for a business valuator with a Certified Valuation Analyst (CVA®) credentials. The National Association of Certified Valuators and Analysts (NACVA) oversees the CVA® designation, which is the only valuation credential accredited by the National Commission for Certifying Agencies® (NCCA®).

Most business owners need to reach their personal wealth targets so that they can transition smoothly to their next stage of life, whatever that may be. To do this, they need to ensure that they are wisely investing in increasing the value of their business. This is where business value transformation services come in to play. These services assess your company to see where you’re leaving value on the table and show you how to recoup and transform barriers to your growth. Using a proven program, we’ll walk you through the 8 key drivers of value and their action steps to help you get the fullest value for your business so you can make the best decision for your next life stage. To learn more about this program, click here.