Business Valuation FAQ
3. Who can provide me with a credible valuation?
Not all business valuations are created equal. A credible valuation requires an experienced and knowledgeable professional to give an independent, well-reasoned and well-supported opinion.
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:
You should seek a valuation expert that has a significant level of experience conducting business appraisals. 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? Has this person’s training come entirely from an internal source, or have they benefited from the perspectives of leaders in the business valuation discipline?
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.
Business Valuation 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. Like the CBA, it also requires the applicant to submit their work product to a group of leading practitioners who put it through an exacting peer review. More information about the ASA designation
Institute of Business Appraisers: The I.B.A.’s principal accreditation is the Certified Business Appraiser (CBA) designation. To attain this credential, applicants must meet certain educational requirements and pass an exam. Like the ASA, applicants must demonstrate 10,000 hours of business valuation experience or 90 hours of advanced course work. Most importantly, applicants must undergo a demanding peer review process, where a committee of leading valuation practitioners evaluates the applicant’s competence through a review of two “demonstration reports.” More information about the CBA designation
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 about the ABV credential
National Association of Certified Valuation Analysts: NACVA offers the Certified Valuation Analyst (CVA) credential, which requires a CPA license, attendance at an optional five-day training course, and passage of an exam and case study. More information about the CVA credential
If you need a business valuation, ask about (and verify) the expert’s professional designations. And remember that the degree of difficulty involved in attaining these credentials varies.
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 a set of professional standards and/or code of ethics is a minimum requirement for a credible valuation.