|Selecting a Business Valuation Expert - Article|
Valuation 101 – Here’s What to Look for When Selecting a Business Valuation Specialist
The following article was authored by Bill McGinnis and published in the Small Business Times, Milwaukee, WI, on May 28, 2004.
Business valuations can have a
significant impact on your financial situation or that of your company.
Unfortunately, most people spend less time selecting a valuation
specialist than they would selecting and negotiating the price of a new
car. This is a huge
While we all like to have the
“right” car at a good price, selecting the wrong car only has a
short-term effect and only a minor economic impact.
With the wrong car, you simply sell it and buy a different one.
Even in buying the right car, the best research and negotiating
are likely to save you only $500 to $5,000.
On the other hand, a business
valuation can have a lasting financial impact.
A 10% difference in the amount arrived at in a valuation could
amount to a multi-million dollar impact.
Even when the value arrived at is only $500,000, a 10% swing
equates to $50,000. It’s worth an investment of time to find the right
What do I mean by “valuation
specialist”? It’s easy
to find someone who will prepare a business valuation.
Unfortunately, many people who offer this service lack the
training, experience and credentials to provide quality results.
A valuation specialist will have all of these qualifications and,
in general, should provide a higher quality valuation.
You may not always need a
valuation specialist. Sometimes,
the “guy down the street” or a trusted advisor with a significant
financial background can provide a rough idea of value.
Only you can decide when this is the right route to go.
However, in going this route, you should expect a significant
What factors should you consider
in selecting a valuation specialist?
factors contributing to credibility include: professional credentials,
education, work experience, valuation experience, written communication
skills, verbal communication skills, poise, appearance and independence.
of these always important? Not
necessarily. In some
circumstances, you may simply be seeking a piece of paper to meet a
legal or regulatory requirement. However,
in many cases, the valuation could be subject to much higher levels of
scrutiny and may result in a more public role or court appearance on the
part of the person preparing the valuation.
In these later cases, you should carefully consider all of the
It is often tempting to hire someone you know well and may already do business with to prepare your valuation. If you do so, be aware that this impairs the preparer’s appearance of objectivity. Don’t underestimate the importance of independence.
How do you apply these factors? I suggest that you develop a series of questions to ask each
potential candidate. Your
accountant or attorney may be quite helpful in this regard.
Interview each candidate to determine how well they fit your
You will find that a good valuation can bring even more satisfaction than a new car.
William W. McGinnis, CFA is a Chartered Financial Analyst and president of W. McGinnis Advisors, LLC, a business valuation, litigation support and securities expert witness firm. He can be reached by telephone at (414) 228-1888 or through the firm’s website www.wmcginnisadvisors.com.
|Professional - Qualified - Credible|
Copyright © 2003 by W. McGinnis Advisors, LLC