The Site Visit as Part of A Business Valuation

When developing a thorough and detailed business valuation, conducting a site survey of the business is an important step in our proven process.

Don’t you need to be nearby to complete a site survey as part of a business valuation?

For many months during the pandemic, in-person site surveys were not possible as non-essential businesses were shut down or access was limited for the safety of the employees. In these situations, we completed the site survey virtually. The reality, however, is I have been conducting effective virtual site surveys for many years.

Assessing a Site Effectively

For decades, I have been preparing detailed, thorough business valuation reports to substantiate the value of a business for four primary reasons:

  1. Tax – for settling of an estate or for gifting shares in a business.
  2. Divorce settlement
  3. Sale of a business
  4. Settling a shareholder or business dispute

Whatever the trigger may be, my job is to be thorough in analyzing the business and substantiating how and why the valuation amount was determined.

A site survey is an essential part of substantiating ‘why’ I came to the conclusion I did about the value of the business and with the right expertise and proven process, site surveys need not be done in person.

A Component of a Proven Process

The valuation analysis includes both quantitative and qualitative factors. The site survey is part of the process to confirm basic information about the business including its existence as well as to confirm its physical attributes. I have leveraged site surveys to confirm physical assets on the property as well as organization, cleanliness, room to support growth, etc.

Leveraging technology, I have conducted virtual site visits and management interviews for years via guided video tours enabling me to assess a business and capture the same information I would capture if I was completing a site visit in-person. Using technology, I can ask questions of my tour guide and obtain images as input to developing the business valuation report.

Technology enables us to be efficient, while adhering to our proven process ensures that a virtual site survey does not compromise the information needed to develop a thorough and complete valuation. It has been my experience for many years that conducting effective virtual site tours is not only possible, but with our proven process it is easily repeatable to serve our clients across the United States and in other countries.

It comes down to expertise and a proven process. Geography need not be a top criteria for choosing a business valuation professional. To learn more, read our recent blog that includes the 3 criteria to focus on when needing a business valuation. A proven business valuation professional knows precisely what information is needed from a site survey and can adeptly gather and analyze that information effectively virtually.

When Values Matter.

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Does Geography Matter for a Business Valuation?

If you are in need of a business valuation, whether to settle an estate or divorce or for a business or shareholder dispute, criteria for selecting the business valuation professional need not consider geography. Similar to a recent blog regarding industry specialization, neither industry or geography matter.

As a certified business appraiser, I have prepared business valuations for privately held businesses throughout the United States; from Maine to Hawaii and North Dakota to Texas. Internationally, I have developed business valuations for businesses in more than fifteen different countries.

Through decades of experience and by leveraging technology, business valuations can be thoroughly and completely prepared remotely. I can and do conduct business as efficiently and effectively with a business owner in Andover, MA as I do working with a business owner in Houston, Texas. Documents are easily and safely shared electronically and for businesses where site visits are relevant, I have and continue to successfully conduct site visits remotely. During the pandemic, site visits were not possible as businesses were shut down or access was limited for the safety of the employees. In such cases and for businesses not located nearby, I have successfully completed ‘site visits’, including for a scuba diving business in Hawaii, gathering the important data needed to finalize the business valuation.

Instead of limiting your search to a professional who is close to you geographically or who has prepared business valuations in your industry sector, I encourage you to focus your evaluation of a business valuation professional on the following 3 most important criteria:

  1. Credentials. Are they certified? Do they have the credentials to demonstrate their understanding of business valuation? One way to assess this could be asking the professional if this is their full-time focus. That can be an indicator that the professional has dedicated his or her career to remaining current on tax laws and business valuations are their sole focus. Ask the professional for their credentials specific to business valuation, and specifically look for the following certifications: CBA, ASA and/or CVA. Note: CPA is not sufficient.
  2. Track record. Does the business valuation professional have a proven track record demonstrating their business valuations stand up to rigorous scrutiny? They should be able to clearly speak to the track record of testifying in court as one example and what the results were.
  3. Proven process. Does the business valuation professional offer a proven process and methodology that is consistently applied regardless of the business or industry? Process is important as it is the process that converts to the final deliverable. When an ‘industry professional’ presents to the trier of fact a 1 page business valuation report and the trier of fact compares that to our 100+ page business valuation report documenting what was done, why it was done, how it was done, conclusions drawn and why those conclusions are reasonable and credible, there is no comparison.

For a recent interesting case study on valuing mineral rights on property in North Dakota, click here.

When Values Matter. Geography Does Not.

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The 2022 IBBA Conference – A Sense of Normalcy

It was great to be at the 2022 International Business Brokers Association (IBBA) Annual Conference in Denver, Colorado earlier this month. It was the first conference I had been to since the pandemic started and the attendance was the largest ever for the conference with over 700 attendees!

So, while gas prices and inflation rise and the war in Ukraine continues, the IBBA conference brought a sense of normalcy with so many business brokers and M&A professionals networking, learning and sharing insights and observations on the market and the industry.

As a member of the IBBA Board of Governors and the Education Committee, I see first hand how much time and effort goes into planning such a conference. The Executive Director and her team did a wonderful job to plan and execute a high quality, high energy event.

At the event, I was honored to be one of two recipients of the 2022 Fellow of the IBBA lifetime award for professionalism, achievement, and service. It has been an honor to be part of this organization.

With Spring’s arrival here in New England, I look forward to more signs of normalcy.

When Values Matter, Credentials Matter, Too

Business valuations can have a significant impact in the outcome of important matters in one’s professional and personal life. Important matters requiring an opinion of value may include the division of assets for a divorce settlement, shareholder dispute, gifting shares, or settling an estate. From taxes to settling a shareholder dispute, a business valuation can factor significantly in the outcome of the matter at hand.

When it comes to such matters, it makes sense to make an informed decision when choosing the right professional to prepare the business valuation. If you or a friend needed a medical opinion, you would likely seek out a professional who had the experience and credentials that are applicable to the specific medical condition. It would not make sense to seek the advice of a dentist for a foot condition, even though the dentist has a medical degree.

When seeking tax advice, most would turn to their CPA. But does turning to a CPA to develop a business valuation make sense? The accounting and business valuation professions are two different disciplines. In fact, the American Institute of Certified Public Accountants (AICPA) recognizes this and offers additional training and accreditation in business valuation for those accountants who want to prepare business valuations.

Business valuation professionals are governed and certified by separate organizations as the discipline of business valuation has its own set of rigor and standards. As the IRS indicates, a “qualified appraiser” is an individual who has earned an appraisal designation from a recognized professional appraiser organization; for business valuation the designations that meet the requirements of a qualified appraiser include CBI, CBA, ASA, CVA, or ABV. A qualified appraiser does not include the designation of CPA. Lou Pereira has earned four of these designations including being a Certified Business Appraiser (CBA), from the Institute of Business Appraisers (IBA) of which there are fewer than 12 in New England and fewer than 200 across the United States.

Choosing a professional to prepare and present a business valuation is an important decision. It is advised that you do your research as the result can be significant in terms of the awarded dollar value whether from arbitration, settlement, or a court ruling. Read how values matter in a divorce case when separate valuations were prepared by a credentialed business appraiser and a CPA. Read how the settlement of an estate was affected when a CPA was hired by one party to prepare the valuation and how that fared against the valuation prepared by a Certified Business Appraiser.

When Values Matter, Credentials Matter, too. Do your homework and get the right credentialed professional preparing the business valuation.

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If You’re Planning a Business Sale, Plan on a Certified Business Valuation

Are you thinking about retiring or selling your business in the New Year? If so, getting a business valuation should be an essential component of your plans.

Certified business appraisers can help facilitate a business sale by determining the fair market value of a business. This avoids leaving money on the table, so you can get the best possible value.

When values matter during a business sale, we recommend receiving a thorough business valuation depending on your unique situation, including:

  • If you’re starting the sales process, reach out early to a certified business appraiser, who can thoroughly assess all factors that might impact the business valuation.
  • If you’re already in the process of negotiating a sale, get a certified business appraiser involved as soon as possible, in order to resolve any potential discrepancies in value.

A recent business valuation was prepared when negotiations for selling a business stalled over the sales price and securing financing. The buyer had relied on a CPA firm that had valued the business at $800,000. A certified business appraisal substantiated the value of the business, enabling the seller to make a substantial amount more on the sale and the deal was closed at an expedited pace, minimizing further buyer due diligence and reducing costs. Read the case study.

Values Matter when selling a business. If you or someone you know is thinking about selling a business in the New Year, contact us to not leave money on the table. A business valuation is an essential part of the plan and should be planned well in advance of a transaction. We offer a free and confidential consultation to help determine next steps for your unique situation.

Selling a Business, Charitable Contributions, and IRS Compliance: The Importance of the Business Valuation

We have built our reputation on preparing detailed, defensible, and thorough business valuations for small and mid-sized privately held companies. When values matter, it is important to have an objective, certified business appraisal that will stand up to scrutiny and, in this case, IRS compliance.

A recent business valuation that we prepared had a number of factors contributing to the complexity of the valuation, including but not limited to:

  • Fractional ownership of the business
  • Multiple entities comprising the business being sold
  • Charitable contributions by a fractional owner including determining the total dollar value and per share value
  • Tight timeframe for sale of the business to a strategic buyer

Read the case study.

When Values Matter: If you or someone you know needs a business valuation for taxes, divorce, selling a business, or resolving a shareholder dispute, contact us to obtain a thorough business valuation that will stand up to rigorous scrutiny.

Divorce and Business Valuations: The Importance of an Objective Business Appraisal as Part of Determining the Equitable Distribution of Assets

Divorces are emotional. There are many considerations, including custody of children and distribution of assets. For many couples going through a divorce, determining the equitable distribution of assets is complicated when one party owns a privately held business.

In such circumstances, fundamental questions include:

  • What is the value of the business?
  • Who determines the value?
  • How do I know if the valuation is accurate?

When values matter, it is important to obtain a business appraisal from an objective and certified professional. The thorough and detailed report will determine the valuation and will define the portion of the business value to be considered a marital asset.

To manage the cost of a divorce, sometimes the business owner or other spouse does not want to pay for an objective business valuation. This can be a very costly decision.

Recently, two business valuations were prepared in order to determine the business value attributable as a marital asset. The owner of a $3.7 million technology company was going through a divorce and the two business valuations documented what portion of the business value was built prior to the marriage and the value that had been built during the marriage and therefore part of the equitable distribution of assets. Read more…

When Values Matter: If you are going through a divorce, or have a friend or family member going through a divorce – and there is a privately-owned business involved – it is important to get a thorough business valuation prepared by a certified business appraisal professional.

Contact us.

Does Impartiality Matter in a Business Valuation?

Yes, impartiality is extremely important. In fact, our work is always equitable, fair, and undertaken without bias which is a major reason why our valuations are highly defensible.

Our work is USPAP compliant. The Uniform Standards of Professional Appraisal Practice (USPAP) are promulgated by the Appraisal Standards Board of the Appraisal Foundation which is authorized by Congress.

The Appraisal Foundation, a private, non-profit educational organization and the nation’s foremost authority on the valuation profession, states that an appraiser must perform assignments with impartiality, objectivity, and independence, and without accommodation of personal interests.

In order to promote and preserve the public trust, our appraisal practice observes the highest standards of professional ethics, including an unwavering commitment to impartiality.

When selecting a business appraiser, it is essential to do so with great care as issues affecting valuation can be complex and confusing. Read more…

Louis Pereira has completed the most intensive training in the country and earned the highest designations available in the field of business valuations. There are fewer than 200 Certified Business Appraisers in the country, and Lou Pereira is one of them. In New England, he is one of only a dozen having earned the rigorous designation of Certified Business Appraiser. Read more…

Merrimack Business Appraisers is here to help. As soon as you think you might need a business valuation, contact us so we can discuss your goals and timing.