FAQs
Valuation is at the core of virtually all strategic business decisions. By having a good understanding of the value of your business, you can reduce taxes, avoid selling for too little or paying too much, plan for a smooth owner succession, and reduce business risk. In short, valuation is a powerful tool that can help owners and business advisors make informed decisions.
Business Owner FAQs
A business valuation is, simply, putting a value on an interest in privately-owned business, professional practice, or asset holding company. It might relate to the company as a whole or a partial ownership interest in it.
A business valuation can be documented in a comprehensive report or it can be done on the back of a cocktail napkin. But for a business valuation to be reliable, it should involve a considerable amount of time and analysis by an experienced, credentialed professional.
For an appraisal or limited calculation, the valuation process involves the following key phases:
-
- Written agreement and retainer
- Information gathering
- Preliminary analysis
- Management interview and (possibly) a site visit
- Additional analysis and report writing
- Report delivery and follow-up discussion
In a business value growth engagement, the process involves periodic client meetings and assessments. This typically involves:
- the initial assessment of the company’s value
- benchmarking the company against its industry peers
- estimating the potential amount of value growth
- identifying opportunities for enhancing earnings
- identifying opportunities for reducing business risk
- re-measurement of business value
- updating value target and identifying new opportunities, as appropriate
We have advised businesses in nearly every state in the nation, but the majority of our clients are located throughout the State of Colorado. We help all types of businesses, but we generally refer banks, hotel/lodging companies, and pharmaceutical/medical device companies to specialists. Our clients include companies of all sizes. Let’s have a conversation to see if we’re a good fit!
A reliable business valuation requires thorough and careful analysis, and so it will take some time. Typically, the time required depends on the purpose of the valuation and the client’s ability to promptly provide the required information.
Generally, once we have received all the requested information, we are able to deliver our report between 30 and 60 days. Engagements requiring a quicker turn-around can sometimes be arranged.
Given the significant financial and legal consequences involved with the need for a business valuation, the business appraisal process is rarely simple or quick. This means the fee often will be significant, as they typically are when working with other highly trained professionals.
A trustworthy valuation specialist won’t be able to quote an exact fee without understanding the purpose of the valuation, the users of the report, the type of business, and other important considerations. But after a 15-20 minute phone conversation, we usually understand the nature of the project well enough to quote a fee.
Some valuation experts charge a fixed fee and others charge on an hourly rate basis. Apex Valuation usually quotes a fixed fee in order to give the client some cost certainty.
We take our clients’ needs for confidentiality very seriously. We are careful about all communications and we commit to maintaining confidentiality in a written agreement with you. Your attorney also will be able to offer some suggestions for staying “under the radar” with employees and competitors as you consider a sale.
We understand that entrepreneurs are busy people, and we do our best to accommodate your schedule and minimize the distractions. However, the valuation process will demand some of your time and attention. We need you to provide us with the needed documents and information and to help us understand “the story behind the numbers”.
We have valued full and partial ownership interests in companies in a wide variety of industries, including manufacturing, distribution, retail, construction, mining, agriculture, technology, entertainment, health care, professional services and investment holding companies. No matter the industry, your business is unique. Chances are, our experience and resources will allow us to reliably value your business.
Bryan DesMarteau has specialized in the valuation of businesses (and partial interests in them) since 1998. After spending seven years with another consulting firm, he founded Apex Valuation in 2005.
Combined, our staff has more than sixty years of experience in advising a wide variety of organizations, from family-owned businesses to large corporations.
Attorney FAQs
The time required depends on the purpose of the valuation and the client’s ability to promptly provide the required information. Generally, once we have received all the requested information, we are able to deliver our report between 30 and 60 days. Engagements requiring a quicker turn-around may be available.
We usually can quote a fixed fee at the end of a 15-20 minute phone conversation.
Bryan DesMarteau’s professional credentials include the Accredited Senior Appraiser (in business valuation) designation (ASA), granted by the American Society of Appraisers, and the Certified Business Appraiser (CBA) designation, conferred by the Institute of Business Appraisers. Although he does not practice law, Mr. DesMarteau is a licensed attorney.
We often serve as a joint expert for parties in a marital dissolution or business dispute.
Bryan DesMarteau has testified as an expert in various courts and he has been appointed as a Special Master to the U.S. District Court of Colorado. However, he does not pursue cases as an expert witness.
In certain circumstances, we must conduct a comprehensive “appraisal”. But in many circumstances, we can conduct a “limited calculation”.
A limited calculation is best thought of as a consultation which is documented in a 5-6 page letter (plus 6-7 worksheets supporting it). The result is expressed as a reasonable range of values (i.e. “between x and y”). This type of analysis is only intended for an “internal” audience (i.e. the client and their attorneys).
Basically, the limited calculation provides context for a discussion or negotiation on the issue of the business’ value. It does not represent a “professional opinion”, but is intended to provide the information to help the parties come to an agreement.
Give us a call! After a short discussion about your needs, we likely will be able to share a redacted report that shows an example of our work in a similar situation.
Accountant FAQs
The time required depends on the purpose of the valuation and the client’s ability to promptly provide the required information. Generally, once we have received all the requested information, we are able to deliver our report between 30 and 60 days. Engagements requiring a quicker turn-around can sometimes be arranged.
We need some understanding of the purpose of the valuation, the users of the report, the nature of the business, and other important considerations. After a 15-20 minute phone conversation, we usually understand the nature of the project well enough to quote a fixed fee.
For an appraisal or limited calculation, the valuation process involves the following key phases:
-
- Written agreement and retainer
- Information gathering
- Preliminary analysis
- Management interview and (possibly) a site visit
- Valuation analysis and report writing
- Report delivery and follow-up discussion
In a business value growth engagement, the process involves periodic client meetings and assessments. This typically involves:
- the initial assessment of the company’s value
- benchmarking the company against its industry peers
- estimating the potential amount of value growth
- identifying opportunities for enhancing earnings
- identifying opportunities for reducing business risk
- re-measurement of business value
- updating value target and identifying new opportunities, as appropriate
Bryan DesMarteau’s professional credentials include the Accredited Senior Appraiser (in business valuation) designation (ASA), granted by the American Society of Appraisers, and the Certified Business Appraiser (CBA) designation, conferred by the Institute of Business Appraisers. Although he does not practice law, Mr. DesMarteau is a licensed attorney. His background is in finance, and he is not an accountant.
We do not prepare tax returns or offer tax advice, but we definitely understand tax requirements, trusts and estates, and similar matters better than the average layperson. And we’re fast learners, so try us!
No, unless you offer valuation services. Apex Valuation does not offer accounting services or tax advice. Our sole focus is helping owners, executives, and business advisors to measure and improve the value of their business.
Additional FAQs
If you own a business (or a partial interest in one), at some point you may need an assessment of its value. The following are examples of situations where owners will likely need the services of a business valuation expert…
Business Transactions
- Selling a business
- Buying a business
- Facilitating an owner buy-in or buy-out
- Obtaining debt or equity financing
- Entering into a buy-sell agreement
Tax Planning and Compliance
- Implementing an estate plan
- Establishing a Family Limited Partnership (FLP) or other investment entity
- Filing an estate tax return
- Electing S-corporation status
- Establishing tax basis
- Gifting stock, partnership or membership interests
- Forming and administering an Employee Stock Ownership Plan (ESOP)
- Complying with IRC 409A
Litigation and Business Disputes
- Dividing property in divorce
- Resolving a dispute among shareholders
- Exercising dissenter’s rights
- Assessing economic damages
- Filing for bankruptcy
- Providing litigation support
Other Circumstances
- Identifying opportunities to increase business value
- Planning for owner and/or manager succession
- Complying with FAS 123R
- Allocation of Purchase Price & Goodwill Impairment testing
- Determining the adequacy of key man or other insurance coverage
- Eminent domain
- Critiquing a business valuation prepared by another party
A credible valuation requires an experienced and knowledgeable professional to give an independent, well-reasoned and well-supported opinion. Not everyone who claims to be able to value a business can do this.
Business valuation is a complex and evolving field. It includes elements of finance, accounting, law, economics, management and other disciplines. Because business valuations usually give rise to significant financial and legal implications, a certain level of care must be exercised in choosing a qualified valuation expert. Consider the following:
Experience
Not only does experience help develop the knowledge necessary to attain technical proficiency, it also cultivates the judgment that is a critical component of a good business valuation.
The valuation expert’s tenure in the business appraisal field is only one aspect to consider. The depth and breadth of that experience can also be important. Does this person have experience in providing a valuation for this purpose (i.e. for a divorce or for an estate tax return)? Does this person have experience in valuing businesses in your industry?
The courts, Internal Revenue Service and other authorities demand an experienced, credentialed valuation advisor. Often, this means seeking the expertise of a person who devotes all or substantially all of their professional efforts toward providing business valuation services.
Professional Credentials
Unlike many other professions, people holding themselves out as business valuation “experts” may or may not have even a minimal level of competency. No college major exists in the discipline, nor are there any state or federal licensing requirements. However, several organizations offer professional certifications for business valuation advisors. These include:
American Society of Appraisers – The A.S.A.’s premier business valuation designation is Accredited Senior Appraiser (ASA). Earning the ASA designation requires meeting certain educational requirements, passage of an exam, and the equivalent of five years of full-time business valuation experience. It also requires the applicant to submit their work product to a group of leading practitioners who put it through an exacting peer review. For more, go to www.appraisers.org
American Institute of Certified Public Accountants – the AICPA grants the Accredited in Business Valuation (ABV) designation only to CPAs who have passed an exam and demonstrated experience in the field (defined as involvement in six business valuation engagements or 150 hours that demonstrate substantial experience and competence). More information on this credential is available at https://www.aicpa-cima.com/home
National Association of Certified Valuation Analysts – NACVA offers the Certified Valuation Analyst (CVA) credential, which requires a CPA license or substantial experience in business valuation, completion of a case study or submission of a sample report, and passage of a multiple-choice exam. NACVA gives more information at www.nacva.com
Other things to consider
- Membership in one or more professional societies dedicated to business valuation indicates a commitment to the field.
- Continuing education not only provides training on developing trends and issues, but it promotes interaction with leading professionals and shows a dedication to professional improvement.
- Adherence to the relevant professional standards and/or code of ethics is a minimum requirement for a credible valuation. USPAP, the valuation standards adopted by Congress, are issued by The Appraisal Foundation. More information can be found here.