Business Valuation Specialist
Someone in charge of estimating the company's or business's economic worth
What is a Business Valuation Specialist?
A business valuation specialist is someone in charge of estimating the company's or business's economic worth. They must complete specialized training to gain the required skills and receive certification from business valuation accredited organizations.
Calculating a company's true value is referred to as business valuation. Analyzing a company's capital structure, prospects for future profits, the market worth of its assets, and objective management evaluations are all part of business valuation.
Business owners collaborate with a business appraisal expert to get a fair assessment of the worth of their enterprise.
They require the assistance of business valuation experts to establish a company's fair worth, especially for business sales, partnership ownership, estate and succession planning, and even divorce proceedings.
The need for these specialists is escalating as fair value reporting and International Financial Reporting Standards (IFRS) gain acceptance on a global scale. In addition, business valuation experts have the chance to collaborate with CEOs and company founders from various sectors.
Key Takeaways
- Business valuation specialists estimate company value through financial analysis and accredited training. Certification is required.
- Duties involve valuations for sales, taxes, lawsuits, mergers, and acquisitions. Expertise in methods like market, income, and cost approaches is needed.
- Leading accrediting organizations include ASA, NACVA, and ISBA. Require training, exams, and demonstration reports.
- Factors like private vs. public company, assets, and purpose determine the optimal valuation expert to hire.
- Fees range from $500 for basic valuation to $50,000+ for complex assets. Experience level also impacts costs.
Qualification, Training, and Certification of a Business Valuation Specialist
Most programs that give business valuation accreditation demand business valuation training, which can be obtained through organization-offered courses, personal studies, or affiliation with outside trainers.
The certification program involves testing, which can be finished in a classroom setting or online. Then, it’s given to the candidate once the accrediting organizations are pleased with their degree of training.
Sometimes, to keep their membership in the group, new members must pay an annual subscription fee. The accreditation groups' continuing education initiatives are another requirement for specialists.
The Financial Modeling & Valuation Analyst (FMVA) certification program was created to help prospective professionals understand professional financial modeling and valuation techniques.
The following groups accredit professionals in business valuation.
American Society Of Appraisers (ASA)
One of the most well-known tools among business appraisers is ASA, founded in 1981. There are two accreditation categories available: accredited member and accredited senior appraiser.
Professionals with two to five years of business appraisal experience should pursue the accredited member certification; those with more than five years of experience should pursue the accredited senior appraiser certification.
NOTE
A demonstration report open to peer review and a minimum level of schooling are also required by ASA for professionals.
National Association Of Business Certified Valuation Analysts (NACVA)
The Certified Valuation Analyst and Accredited Valuation Analyst classes are offered by the National Association of Business Certified Valuation Analysts (NACVA). This group was founded in 1991.
Both certifications require potential candidates to hold a CPA license or a business degree as a baseline. Additionally, they must offer references that attest to their expertise in company valuation.
International Society Of Business Appraisers (ISBA)
The Business Certified Appraiser certification training is provided by ISBA. Holders of this certification undergo intensive training and testing, and they must pass a demonstration report subject to peer review to prove their competency in valuation.
Business Appraisers Institute (IBA)
IBA is the oldest company valuation program; it was founded in 1978. It comprises membership, assessments for the different levels of professionals, business appraisal reports, and standard valuation classes.
NOTE
In 2016, the IBA was dissolved and merged into NACVA.
Fast-track options are included to enable professionals with current certifications to finish the program swiftly.
Several of the IBA's programs for company valuation include:
- Holders of the Accredited Business Appraisal Review: The ABAR program aims to give stakeholders in the company valuation process quality assurance. Members of ABAR have successfully completed assessments through exams and a demonstration report that has undergone peer review. They also hold a recognized business valuation credential.
- Holders of the Business Valuator Accredited for Litigation (BVAL) certification: They must possess a recognized business valuation credential, finish a five-day training, pass an exam, and show competence in a presentation and testimony.
- Holders of the Certified Business Appraiser (CBA): They must satisfy minimal educational requirements, pass a test, and prove their expertise in two demonstration reports subject to peer review.
Responsibilities of a Business Valuation Specialist
Those who enjoy taking on difficult tasks are needed in the business valuation sector. A company evaluator's typical duties include:
- Financial assessments concerning lawsuits
- Engagement with transfer pricing
- Financial Recommendations for retirement preparation and exit strategies
- Opinions on succession, planning, and estate taxes
- Reports on the value of mergers and purchases
- Recapitalization
- Opinion on expected future profits
- Business risks
- Asset valuation estimate for a business
You can get an accurate and tenable valuation of your company or its assets by choosing an appraiser with the credentials and relevant experience to your requirements.
Knowing the qualifications and experience needed for different valuations will help you find a business valuation expert who best fits the task.
How To Select A Business Valuation Expert
There are a number of ways through which an organization can select a business valuation expert. We can select on the criteria of commercial valuation experience, knowledge, tax-related valuation, valuation of mergers and acquisitions, and more. Here are some factors to assess.
Commercial Valuation Experience
Consider a business appraiser's educational background before deciding whether or not they are the best fit for your particular requirements. For example, where and what topics in finance and assessment did the appraiser study, as discussed above?
Valuation Knowledge
Examine the expertise of the company valuation expert after confirming their credentials. For example, are they a generalist or a professional, respectively? What particular expertise do they have?
It's crucial to consider the appraiser's specialty. For example, the gold standard for business valuation, the ASA designation, may be held by an appraiser. But, if you need one for portfolio valuation, a different accreditation might be more appropriate.
Ensure the expertise of the valuation expert matches your requirements when assessing their experience. In addition, you must consider certain factors for each form of valuation analysis.
Expertise in one or more of the market, income, cost methods, and other kinds of valuations is required. The various kinds of business valuations and the associated valuation techniques are as follows:
Valuation For Mergers And Acquisitions (M&A)
You need an appraiser with extensive expertise performing valuations for M&A transactions regarding mergers and acquisitions. Compared to valuations for other kinds of transactions, M&A valuations depend more heavily on the market approach.
The market approach, which bases its estimation of company value on information from similar businesses and transactions, offers a value estimate that might be sufficient for an M&A transaction.
Since it will experience profitable synergies from the purchase, the acquiring company is frequently less concerned with determining a more exact value in these transactions.
Most other uses call for a more precise valuation, so an expert with knowledge of the income and cost approaches would be a superior match.
Portfolio Appraisal
Along with the income approach, the market approach is usually used in portfolio valuation.
If you require asset portfolio valuation, the expert you choose should ideally have extensive experience in this field or, at the very least, expertise in using both of these valuation methods.
Private Company Appraisal
The business valuation specialist is required in cases involving private companies, such as sales, partnership dissolutions, or divorces, as doing so presents a special set of difficulties.
The appraiser will frequently struggle to find comparable companies to use for the application of the market method and will typically depend most heavily on the income approach because the financial information of private companies is more closely held and less transparent.
The appraiser must have expertise in applying discounts when valuing a private business. Several factors that have a large effect on private business value but have less impact on publicly traded companies are considered by applying the following discounts.
A business valuation specialist with extensive experience valuing private businesses and their assets will know whether any of the following discounts should be used and how to calculate them.
- Marketability: Considers the reality that private company funds are illiquid and that the assets cannot be quickly or easily converted to cash.
- Lack of control: Applicable when decisions regarding the company's finances or operations must be discussed with other owners first. If an LLC member or partner sells their respective portions of the company to a third party who will later join as a partner or member, the absence of a control discount would be applicable.
- The buyer won't have complete control over the company and won't have full control over the outcome of their investment, so the lack of control discount adjusts value to reflect this.
- The Key Man: Used when an important employee's value to the company is closely linked. For example, a small software development business might experience a decline in value if one of its employees, who is in charge of developing most of the firm's intellectual property, were to leave.
Tax-Related Valuations
You need a business valuation specialist knowledgeable about your industry if you want to dispute property tax assessments with a defensible valuation. The value of tangible assets and complete company enterprise valuations are considered in property tax assessments.
This calls for an appraiser with extensive knowledge of the sector, your business, and property tax rules.
Taxing authorities will carefully review tax assessment challenges, so it is important to show a professional business valuation prepared by a licensed business valuation expert. A challenge not supported by a business valuation expert's credentials is much less likely to succeed.
NOTE
The appraiser you choose should ideally have had much practice effectively defending against assessment challenges.
Salary of a Business Valuation Specialist
Some factors that affect how much a business valuation specialist costs include business size, the nature of the assets being valued, and other variables that affect the wages and fees that business valuation experts receive.
Some small company owners valuing their companies for sale may give estimates between $500 and $1,000 based on estimates of the assets' values.
Due to the level of responsibility and judgment needed in the reports, more seasoned professionals typically charge higher fees. Business valuation experts may work independently or be hired by big companies needing their services.
NOTE
Valuations requiring attention can cost between $3,500 and $10,000. Those requiring outside study and the assistance of other experts can cost up to $50,000. Therefore, specialists must weigh the effort necessary, the need for outside experts, and the company size.
To help them acquire experience in the field, most inexperienced valuation specialists prefer to work for large accounting firms.
On the other hand, more seasoned professionals prefer working as independent valuation specialists and advisers because it enables them to increase their yearly income.
Business Valuation Specialist FAQs
Candidates must have a CPA and offer references that attest to their expertise in the field of company valuation.
Business valuation specialists can get their certifications from the following societies:
- American Society of Appraisers (ASA)
- National Association of Business Certified Valuation Analysts (NACVA)
- International Society of Business Appraisers (ISBA)
The duties of business valuation specialists include but are not limited to the following:
- Financial assessments concerning lawsuits
- Engagement with transfer pricing
- Financial Recommendations for retirement preparation and exit strategies
- Opinions on succession, planning, and estate taxes
- Reports on the value of mergers and purchases
- Recapitalization
- Opinion on expected future profits
- Business risks
- Asset valuation estimate for a business
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