Business Valuation Blog | Understanding Buying / Selling a Company

What is NACVA and why does it matter for your business valuation?

Posted by Business Valuation Specialists LLC on Mar 14, 2018 8:46:00 AM

When you're considering having your business appraised, you'll probably hear a lot of new terms. NACVA, the National Association of Certified Valuators and Analysts, provides a wide range of services, including certification, for business appraisers. This designation can make a huge difference in your business when it's time to have an appraisal performed. Here's a quick look at what the Association does and how it will benefit your company in the long run.

What is NACVA and why does it matter for your business valuation?

Originally the area of certified public accountants and business professionals, business valuations have been used to determine a company's worth for several decades. However, prior to the formation of NACVA and similar business valuation certification organizations, the methodologies that were used by these individuals followed a wide range of approaches and calculations. When this information was brought before legal, financial, insurance and tax organizations, it was put through strong scrutiny to ensure the calculations were correct. Unfortunately, in many cases, the value that was calculated was determined to be incorrect, leaving many companies scrambling to provide alternative documentation of their values.

In 1990, NACVA was founded to support CPAs and business professionals in their valuation process. It developed tested methodologies for calculating business values in a wide range of circumstances. Over time, as these methodologies were put through their paces in legal, insurance, financial and tax circles, they were proven to provide the most accurate picture of business values. In the intervening years, the Association has certified over 35,000 financial and accounting professionals, including CPAs and valuation specialists. The majority of that membership, approximately 80%, are certified in one of the Association's three main certification programs: Certified Valuation Analyst or CVA, Accredited in Business Appraisal Review or ABAR, or Master Analyst in Financial Forensics or MAFF.

Where this impacts your company's valuation is in the level of detail and accuracy of the appraisal report that is generated by a certified appraiser. Because of the methodologies that are used, these documents often include vital insights into your company's performance and operations, allowing you to grow strong areas of your business while improving those areas that aren't doing as well. The report will also often include information on your position within your industry, providing you with options for solidifying that position or gaining ground in new areas that have until now been unexplored.

It will also look at your industry as a whole. Is it growing and healthy, or are there areas of concern that may be holding it back? Is it being impacted by digitization or disruption in the market? What are the current projections for growth? Because these aspects will impact your company's performance, they will be taken into account in the valuation report. Intangible assets, such as goodwill and reputation, will also be calculated into the final figure.

By being aware of what NACVA is and how it's certified appraiser members are able to bring more value to your business valuation, you can use that knowledge as leverage at the negotiating table, as insights into your business and industry and many more areas. Working with a certified appraiser ensures that your business valuation has been calculated using standardized methodologies that will stand up well to strong scrutiny in a wide range of areas, including legal, insurance, financial and tax circles.

Topics: NACVA, certified appraisal