Frequently Asked Questions

Who needs a business valuation?

Is the full valuation always necessary? Is there an “ala carte” way to do this?

I’m thinking about selling my business. Is a valuation really one of the first things I should consider?

I’m thinking about buying a business, instead. Again, should a valuation become one of my top priorities?

How do I know who to pick to do my valuation? And what sets you apart from other businesses like yours?

How much does a business valuation cost?

How long does a business valuation take?

So you can't just look up my industry in a book and grab a number for me?

Why can't I just use a formula of 6 times EBITDA to value my business?

 

Who needs a business valuation?

There are many situations where a comprehensive business valuation would be highly recommended or even legally required. Selling a business, buying a business, considering an acquisition, doing an annual stock appraisal for your ESOP, figuring out gift and estate tax issues, settling partnership issues or shareholder disputes, and converting from a C-corporation to an S-corporation are all reasons to seek professional help in properly valuing your business, among many others.

 

Is the full valuation always necessary? Is there an “ala carte” way to do this?

Regardless of the "size" of the business or the "purpose" of the valuation, we at Business Appraisal Servcies, LLC, are certified valuation professionals and as a result we are bound by professional guidelines that stipulate minimum requirements for a certified valuation. As a result, we are obligated to complete a comprehensive valuation, and an "ala carte" option is not in anyone's best interest. 

 

I’m thinking about selling my business. Is a valuation really one of the first things I should consider?

When selling your business, the first thing to consider is to whom you want to sell your business.  Is it your management team, your employees as a whole (ESOP), your family members, or to an independent third party buyer?

The very next thing to consider is "What is a fair price at which to offer the stock of the business to the buyer?"  Since the buyer will have a vested interest in not overpaying for the stock, and you have a vested interest in not underpricing the stock, there needs to be an independent arbitrator on the issue of a fair valuation.  Business Appraisal Services, LLC will help you understand what is a fair stock price for all parties involved in the sale.

If regulatory agencies will ultimately be involved in reviewing the transaction, an independent third party appraisal will be required to satisfy their regulatory requirements for independence and to document the valuation analysis.

Another benefit of the business valuation is the identification of your company’s strengths and risks, and their link to stock value. The earlier you start, the more time you have to identify and address weaknesses to make your company as strong and competitive as possible for potential buyers.

 

I’m thinking about buying a business, instead. Again, should a valuation become one of my top priorities?

There are many risks in purchasing a business—an honest and accurate appraisal can help you ensure you’re paying the right amount and know what you’re getting in return, before you sink too much time or money into a potential deal.  The business valuation will also give you essential information about how the target company compares to industry financial data.

 

How do I know who to pick to do my valuation? And what sets you apart from other businesses like yours?

A strong business valuation consultant should possess credentials from leading associations in the field such as the American Society of Appraisers (ASA), the National Association of Certified Valuators and Analysts (NACVA), and the Institute of Business Appraisers (IBA).  A strong business valuation consultant should also have solid experience in the field. Here at BAS, we possess both. Our founder and president, Bradley Van Horn, has nearly 30 years’ worth of experience in valuations, is a registered Certified Public Accountant, and is a certified business appraiser by the ASA, BCA, CBA, and CVA. The rest of our team has been carefully chosen for their their technical knowledge, their professional experience, and their passion for helping clients solve financial issues.

A strong business valuation firm also lets relevant market data guide all of its valuation decisions.  At BAS, we spend significant resources investing in a multitude of market data sources so that our valuation analysis and conclusions can reflect the informed judgments of the marketplace.  Our investment in market data is only surpassed by our investment in people.

BAS stands out from the competition due to the strong experience level of its President, the power of the professional team who works on each valuation project, and our commitment to base our analysis on significant and relevant market data.

 

How much does a business valuation cost?

The honest answer is "it depends."  Business valuations can typically range in cost between $5,000 and $25,000.  Why such a big range?  Factors such as complexity of the ownership structure, variability of historical earnings, compensation structure in your business, relative size and complexity of your business, existence of a financial forecast, presence of litigation or other disputes impacting the value of the stock, non-operating assets such as excess cash or excess working capital, review of the valuation by regulatory agencies or independent third parties and many other issues can cause a greater amount of time to be spend on our part in order to properly document our analysis and conclusions. 

We would be happy to quickly give you a firm fee quote once we are able to have a discussion with you about the issues listed above, review a copy of your latest financial statements, and determine the scope of the valuation project.

 

How long does a business valuation take?

From the time we receive your company’s financial and operating data pursuant to our Information Request List, it typically takes approximately four to six weeks to complete our analysis and provide to you a comprehensive set of valuation schedules.  A comprehensive valuation report documenting our analysis and conclusions can be provided shortly after that.

 

So you can't just look up my industry in a book and grab a value for me?

That wouldn’t be in anyone’s best interest. There are ethical and legal issues at stake in every valuation; accuracy and thoroughness is vital for all parties involved. Our professional certification standards do not allow a "back of the envelope" valuation analysis.

 

Why can't I just use a formula of 6 times EBITDA to value my business?

You know someone who sold their company for 6 times EBITDA.  That's what everyone says, anyway.  Doesn't that formula apply to pretty much all businesses?

Every business is different and unique in ways that enable it to make a profit. No two workplaces are alike. We could list at least a hundred different factors that go into a business’ worth, and variances in any one of them can have a significant impact on the overall number. What’s the management team like? How does your business differentiate it from the competition?  Are you current on technology? Is there an ESOP in place? Are we valuing voting or non-voting stock? How much debt is outstanding? Are there any shareholder agreements that provide liquidity for the stock? All of these are relevant factors to consider (and more reasons to consult an expert analyst, instead of attempting to use public software or a simple valuation formula).

In addition, industry and other economic market data used in the valuation changes on a daily basis.  Valuation multiples that may have been applicable to a similar business at a prior date will be different today.  An independent valuation performed by a trained, competent professional is the only way to find out what the real market value of your business currently is.