Frequently Asked Questions
Frequently Asked Questions
Some of the common questions asked by our clients are answered here.
Business Appraisers FAQ
- What additional value do the silver and gold packages have compared to the bronze package?
- Do business appraisers need to be certified?
- What are the organizations in the United States that certify business appraisers?
- My business lost money last year. Does this mean it doesn't have any value?
- Can you value companies in my location?
- Are all business valuation reports essentially the same?
- How do you turn around the business valuation reports so fast?
- How do you determine earnings in the Business Appraisal Packages?
- What is a minority interest?
- What is a control interest?
- What is a discount for lack of marketability?
- What is your refund policy?
- What if I only have tax returns to document my financial performance?
- What is a market approach?
Q: What additional value do the silver and gold packages have compared to the bronze package?
A: All business appraisal packages provide a business valuation estimate of the marketplace value and can be helpful as a benchmark to price a business if you are selling a company. The Silver and Gold company appraisal reports contain more valuation drivers and are therefore likely to be more accurate.
Q: Do business appraisers need to be certified?
A: The answer is no. Unlike real estate appraisers, there is no required state certification that exists for business appraisers. As a result, there are many business appraisers who have not had formal training in business valuations. We recommend that you entrust the valuation of your company only to professionals whose competence and training have met certification standards from one of the major business valuation organizations so that you aren't left asking "What's the real value of my business?"
Q: What are the organizations in the United States that certify business appraisers?
A: The four organizations in the United States that certify business appraisers are:
- 1) The Institute of Business Appraisers, Inc. (CBA);
- 2) The American Society of Appraisers (ASA);
- 3) The National Association of Certified Valuation Analysts (CVA); and
- 4) The American Institute of Certified Public Accountants (ABV).
Before you select a business appraiser, carefully review his or her credentials and experience. Generally, those who have obtained the more difficult credentials, such as the Certified Business Appraiser (CBA) from the Institute of Business Appraisers or the Accredited Senior Appraiser (ASA) in business valuation from the American Society of Appraisers, will do quality work and also be respected in court should that be necessary.
Q: My business lost money last year. Does this mean it doesn't have any value?
A: No. Every business has some positive value providing it is expecting to operate in the future.
Q: Can you value companies in my location?
A: Absolutely. We can value companies in all 50 states.
Q: Are all business valuation reports essentially the same?
A: Absolutely not. Valuation reports vary from appraiser to appraiser and from firm to firm. We have seen a lot of variability in appraisal reports over the years and have occasionally made corrections to other firms' reports that were substandard.
Q: How do you turn around the business valuation reports so fast?
A: We have a dedicated team that is very efficient. This efficiency not only saves you time, but also reduces costs of business valuations, and we pass the savings on to you.
Q: How do you determine earnings in the Business Appraisal Packages?
A: We use what is referred to as Seller's Discretionary Earnings (SDE). SDE are those earnings that can be expected by a business owner, without regard to items subject to spending preferences. For instance, one business owner may prefer debt financing and, therefore, will have an interest expense; while another may not. This affects the reported bottom line. Also, one may have the business set up as an S-Corporation, which provides pass-through income; while another business owner may elect to be a C-Corporation. Again, this will cause net income to vary between otherwise identical businesses. These choices affect the amount of money that would be available, on net, to a business owner. Therefore, in order to provide a consistent earnings base, we add back 'discretionary' expenditures to calculate Seller's Discretionary Earnings. The questionnaire will ask the appropriate questions in order for BizValNow.com to make the adjustments. We then use SDE to calculate a business valuation indication.
Q: What is a minority interest?
A: A minority interest is an interest in a company that is non-controlling. For instance, if there are two owners in a company - one with 51% and another with 49% - then the 49% owner is deemed to have a minority interest because he or she presumably does not have voting control rights. In these situations a discount may be applied to the minority interest. This discount is often termed a 'discount for lack of control' or DLOC.
Q: What is a control interest?
A: A control interest is an interest in a company that is controlling. For instance, if there are two owners in a company - one with 51% and another with 49% - then the 51% owner is deemed to have a control interest because he or she presumably has voting control rights. In these situations a premium may be applied to the control interest.
Q: What is a discount for lack of marketability?
A: A discount for lack of marketability applies to private businesses in some valuation methods due to the fact that private companies do not have a ready market in which to buy and sell shares, unlike publicly traded companies. For this reason, when comparing to publicly traded company data, a discount may be applied.
Q: What is your refund policy?
A: Should you wish to cancel your project, we will gladly refund your payment, net of transactions costs, prior to beginning work. Once we begin processing your business valuation report, a minimum 50% service charge applies.
Q: What if I only have tax returns to document my financial performance?
A: Tax returns are sufficient; in fact, we use them frequently. We can still do the project with your business tax returns.
Q: What is a market approach?
A: A market approach is one of the three common approaches used by business appraisers. As such, it considers what the buyers paid for similar businesses. The other approaches are income and asset.
