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.

Contact us.

How Important is Industry Specialization for Business Valuations?

For some professional services, industry specialization matters. A professional’s focus and in-depth knowledge of a particular industry can offer tremendous value to the client. I am regularly asked about industry experience and if I specialize in select industries to prepare business valuations.

Do you have experience in my sector?

It is not unreasonable that many people seeking a business valuation want assurance that the business appraiser understands their industry. While understandable, it should not be a focus when evaluating a business appraiser.

There are much more important aspects of a quality business valuation than if the business appraisal has developed valuations in the specific sector. Of paramount concern should be objectivity and impartiality.

Given my years of experience, I have developed business valuations for all major industries and sectors including, but not limited to, retail, food service, wholesale, manufacturing, technical services, professional services, healthcare, and real estate holding companies. For a list of industries for which business valuations have been prepared, click here.

Is industry specialization an important factor in choosing a business appraiser?

Given that industry experience is not a top qualifier, it is certainly not recommended that you seek a business appraiser who specializes in select industries. Our experience has shown that industry specialization does not translate into better results. On several occasions, our work has prevailed over the opposing so-called industry specialists.

What is more important than experience in the specific industry is the process, including a careful and thorough qualitative and quantitative analysis of the company and the environment in which it operates.  The business appraiser must consider the history, products, markets, customers, management and employees, facilities, capital structure, competitors, industry, economy, financial performance, and future earning capacity.

Instead of industry, focus on the following to evaluate a business appraiser:

  1. Credentials – what certifications does this professional have? Has this professional achieved the training and industry designations available for this field?
  2. Track record – do they have a proven track record for their business valuations holding up to the strictest scrutiny?
  3. Process – do they have and adhere to a thorough, detailed process documenting what was done, why it was done, how it was done, and the conclusions drawn as well as supporting documentation of why such conclusions were drawn?
  4. Focus – is this a full time focus of the appraiser? How much of the work does the individual you are speaking with do as opposed to handing off the work to a junior person?
  5. Methodology – we have long embraced and leveraged the Discounted Cash Flow method, a method many have more recently adopted. Ask the business appraisal professional to explain their preferred method and why.

Choosing a business appraisal professional based solely on industry specialization is not recommended. There are far more important criteria, and our experience has shown that the end result or relying on that single factor can be sub-optimal.

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.

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.

Honored to Receive Prestigious NACVA Award at National Conference

At the National Association of Certified Valuators and Analysts (NACVA) Conference in June, Lou Pereira received the Massachusetts State Chapter President Leadership Award. “Being recognized in this way is a tremendous honor for me,” Lou observed, “adding that the success of the Massachusetts State Chapter is due to the efforts of the entire board who work to bring the best business valuation training programs here.”

The conference brought together on Zoom many of the best known thought leaders in the business valuation field. It provided the opportunity to discuss new and old issues with other top business appraisers.

NACVA is a global, professional association that delivers training from the nation’s leading experts in consulting fields such as business valuation, financial litigation forensics, expert witnessing, forensic accounting, risk fraud management, mergers and acquisitions, business and intellectual property damages, fair value, healthcare consulting, and exit strategies. Along with its training and certification programs, NACVA offers a range of support services, reference materials, software, and customized databases to enhance the professional capabilities and capacities of its members.

NACVA’s Certified Valuation Analyst (CVA) is the only business valuation credential accredited by the National Commission for Certifying Agencies (NCCA) and the American National Standards Institute (ANSI).

Read more about Lou Pereira’s qualifications…

Independence Matters Every Day in Business Valuations

As July 4th approaches, Americans seem poised to celebrate Independence Day with more spirit than ever. Yet, here at Merrimack Business Appraisers, independence holds meaning for us all year long.

In order to promote and preserve the public trust, our appraisal practice observes the highest standards of professional ethics, including an unwavering commitment to independence. This means that we are free from outside control, obligation, or bias due to a personal interest.

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

  • The Appraisal Foundation’s Uniform Standards of Professional Appraisal Practice (USPAP) has established ethical and performance standards for the appraisal profession in the US. Adopted by Congress in 1989, USPAP is updated every two years so that appraisers have the information they need to deliver unbiased and thoughtful opinions of value. Read more…
  • The selection of a business appraiser must be undertaken with great care, as issues affecting valuation can be complex and confusing. USPAP provides important guidance in the form of Advisory Opinions and Frequently Asked Questions. 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…

At Merrimack Business Appraisers, we are here to help when you need a business valuation. And you can always count on our independence.

When Values Matter – Objectivity is a Must

Did you know that an appraiser must promote and preserve the public trust inherent in appraisal practice by observing the highest standards of professional ethics?

We at Merrimack Business Appraisers pride ourselves on being unfailingly objective.

The Appraisal Foundation, a private, non-profit educational organization, ensures that an appraiser must perform assignments with impartiality, objectivity, and independence, and without accommodation of personal interests.

The Appraisal Foundation is the nation’s foremost authority on the valuation profession. The organization sets the Congressionally-authorized standards and qualifications…and provides voluntary guidance on recognized valuation methods and techniques for all valuation professionals.

(Source: Uniform Standards of Professional Appraisal Practice 2020-2021 Edition, The Appraisal Foundation, page E.)

The Foundation’s Uniform Standards of Professional Appraisal Practice (USPAP) has established ethical and performance standards for the appraisal profession in the US. Adopted by Congress in 1989, USPAP is updated every two years so that appraisers have the information they need to deliver unbiased and thoughtful opinions of value. Read more…

The organization also provides important guidance in the form of Advisory Opinions and Frequently Asked Questions. The issues affecting valuation can be complex leaving the marketplace often confused which is why the selection of a business appraiser must be undertaken carefully. 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…

At Merrimack Business Appraisers, we are here to help when you need a business valuation. And you can always count on us for objectivity.

When Values Matter – Choose Your Business Appraiser Carefully

Welcome to the first edition of When Values Matter. We hope you will find this blog informative and educational as we explore various topics related to business valuation for small and mid-sized private companies, including closely-held family businesses.

With today’s hectic business pace, many professionals may not fully realize that all valuations are not alike. No more than all family law attorneys are alike, nor all CPAs are alike, there can be vast differences in the quality of professional advice.  Similarly, a business valuation is not a commodity.

There are many different reasons to value a business including tax matters (estate settlement, gifting, and employment related), divorce settlement, shareholder dispute resolution, or sale of a business. Consequences can be dire if the wrong value is used, or if a value intended for one purpose is used for another.

So how do you select a business appraiser?

When a business valuation is needed, look for the following:

  • Track Record.
    While most cases settle outside of court, when Merrimack Business Appraisers’ valuations have been presented in court by Mr. Pereira, the triers of fact have ruled in favor of the opinion of value 100% of the time.
  • Ethics.
    When business values matter, professional values matter too including objectivity and ethics.
  • Certifications.
    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 is one of them. In New England, he is one of only a dozen having earned the rigorous designation of Certified Business Appraiser.

At Merrimack Business Appraisers, we are here to help when values matter to you.