If you have questions about the valuation process that aren't answered here
or questions about any of our services, don't hesitate to contact any ComStock
office.What is a valuation?
Why is a valuation needed?
How do I choose a valuation firm?
How is a valuation prepared?
What else should I expect from a firm?
Q. What is a valuation?
A. Put simply, the valuation process determines the value of a business, business ownership interest, security or intangible asset.
Q. Why is a valuation needed?
A. A valuation helps you make informed decisions about business issues such as estate planning and taxes, employee stock ownership plans, the sale of a business, buy/sell agreements, disputes and more.
Q. How do I choose a valuation firm?
A. Many companies offer valuation services. However, not all of them can deliver the skill, experience, objectivity and credentials that are essential to ensuring that you get a fair and defensible valuation. Keep the following guidelines in mind when evaluating a valuation firm:
- Experience - A firm should specialize and work full-time in business valuation and be certified by an organization such as the American Society of Appraisers or the National Association of Certified Valuation Analysts. Valuation professionals in a better-qualified firm will have many years of experience and will have produced hundreds, if not thousands, of valuations.
- Independence - To ensure that your valuation will be defensible, you should avoid any conflicts of interest. The firm you hire should not already be providing you with financial services such as accounting, auditing, tax preparation or business brokering. Also, the firm should not be paid on a contingency basis.
- Defensibility - Assess a firm's valuation methods and credibility. A good firm will produce a report that is defensible in court.
Q. How is a valuation prepared?
A. The valuation firm gathers quantitative and qualitative information about your business, the interest being valued and the valuation circumstance. Information is also gathered about your management, industry, competition, future prospects and much more. Questions asked include:
- Is your business interest readily marketable?
- Is it being valued as a controlling or minority interest?
- Does the security have voting rights?
- Do restrictive agreements or special rights exist?
Q. What else should I expect from a firm?
A. You should expect a cost-effective approach to fact finding and analysis and a timely execution of the final conclusion. Most importantly, you should expect an accurate, understandable and detailed valuation that leads directly and believably to the firm's conclusion.