Business Valuation Blog | Understanding Buying / Selling a Company

Business owners may occasionally require a certified valuation in transactional situations and typically respond in a reactive manner to complete the task. Few, however, realize how crucial it is to keep that valuation current. An appraisal provides a snapshot of your company’s worth at a specific moment, but business value is never static. Market conditions, operational performance, and industry trends are constantly changing. Obtaining an updated business valuation annually is a smart and strategic move for many reasons.

Even if your business has a stable track record, the factors that drive its value rarely stay the same. Revenue may rise or fall, new competitors may enter the market, or industry multiples could shift. An annual valuation update captures these changes, ensuring you always have a current and accurate understanding of your company’s financial position.

Current information is critical for decision-making. Whether you’re budgeting for growth, considering expansion, or evaluating a potential merger, an updated valuation provides the foundation for sound strategic planning. It can also help measure whether past initiatives continue to add value over time.

Being proactive can minimize the effects of unexpected events. For example, if a potential partner wants to exit the firm, having a current valuation on hand allows you to act quickly and negotiate confidently. Business disputes and even personal life changes, such as a divorce or a change in your health, can be tackled efficiently and effectively with an updated valuation that protects your personal interests.

For owners considering succession, annual valuations help track progress toward their transition goals. They also provide critical support for estate planning, gifting strategies, and buy/sell agreements. Accurate, current data makes these processes smoother and more defensible.

Banks and investors rely on credible valuation data to assess financial strength. By maintaining an updated valuation report, you demonstrate transparency, accountability, and a commitment to understanding your business, all traits that inspire confidence in financial partners.

Updating an existing valuation can be less expensive than starting from scratch. Most of the foundational work is already done, and the appraiser can update their analysis and report in a more timely and cost-effective fashion.

In summary, obtaining a business valuation shouldn’t be a one-and-done exercise. Just like you review your financial statements each year, updating an appraisal annually ensures you always know where your company stands. It’s an empowering step toward planning, protecting, and growing your business with confidence.

It’s not uncommon for two business valuation professionals to arrive at different conclusions about the same company’s value. When this happens, whether it’s for litigation, shareholder disputes, divorce cases, or buy-sell disagreements, one side may request a review and rebuttal of the opposing appraisal report. This process is critical to determining the strengths and weaknesses of both reports, which will assist the court further or help negotiating parties arrive at an objective understanding of the most reasonable value.

A review and rebuttal assignment will involve a critical analysis of another appraiser’s report to assess its credibility, compliance, and reasonableness. The reviewing expert identifies any technical errors, unsupported assumptions, or departures from recognized valuation standards, such as the Uniform Standards of Professional Appraisal Practice (USPAP) or the National Association of Certified Valuators and Analysts (NACVA) guidelines.

The deliverable will typically be a concise summary report outlining these findings and how potential errors impact the opposing analysis and final conclusion of value.

When two valuations differ, decision-makers such as judges, attorneys, and business owners need clarity on why the numbers are far apart. A well-prepared rebuttal provides that clarity by highlighting unsupported assumptions or unrealistic projections as well as identifying flaws in methodology, or limitations with the assumptions and approaches taken.

It’s important that the review and rebuttal ensure the discussion remains focused on analytical integrity rather than advocacy or bias. The opinions and responses should be a professional critique of the work and not toward the individual who performed it. The goal is to maintain objectivity and demonstrate analytical soundness. A credible rebuttal enhances the reviewing expert’s reputation and strengthens the overall integrity of the valuation process.

A review and rebuttal of an opposing business appraisal report serves as a vital quality control mechanism in contentious valuation matters. By identifying weaknesses, inconsistencies, and deviations from accepted practice, the reviewing appraiser helps clients, attorneys, and courts reach more reliable settlements based on fair and reasonable estimates of value.

Ultimately, a well-executed rebuttal isn’t just about defending the client’s or your own opinions but more about upholding the standards of the profession and ensuring that valuation estimates are based on sound analysis, reliable data, and objective reasoning.

For many small business owners, the value of their company is often based on their own belief or a quick calculation from a cheap or even free, unsupportable source. While this approach may seem easy, it often leads to inaccurate conclusions that can cost an owner money, opportunities, and credibility. A certified business valuation, performed by a qualified appraiser, provides clarity, accuracy, and peace of mind, while taking the guesswork out of the equation.

A small difference can have a significant impact when appraising your business. Over or underestimating value can create concerns with lenders and potential buyers, as well as internal tax and accounting requirements. Certified valuation professionals utilize proven methodologies under the income, market, and asset approaches, which take into account appropriate financial, market, and industry data.

Business owners often face critical decisions regarding the future of their company. Whether it pertains to selling, bringing on investors, securing financing, planning for succession, or resolving disputes, a fair and realistic value assessment should be a top priority. All these potential events require a defensible number, not a guess. A certified valuation provides the credible documentation that stakeholders, banks, courts, and potential buyers trust.

Owners often tend to rely on “rules of thumb” or anecdotal comparisons that do not account for the specifics of their business. This oversimplification can lead to undervaluing strengths or overlooking risks. A certified appraiser considers all factors that may impact value to create a complete, unbiased picture.

While a certified valuation comes with a cost, it often saves or earns business owners much more over time. By knowing the true value of your business, you can negotiate effectively, plan strategically, and avoid costly mistakes that arise from guessing.

In summary, a certified valuation is not just another report, but a tool that empowers small business owners to protect their hard work, maximize opportunities, and move forward with confidence. Guessing the value of your business is risky; knowing it with certainty is powerful.

Take the extra time and effort and reach out to a valuation professional today who can provide additional insight into the importance of obtaining a certified business appraisal.

When it comes to professional valuation practice, two sets of standards often come into play: USPAP (Uniform Standards of Professional Appraisal Practice) and the NACVA (National Association of Certified Valuators and Analysts). While both aim to ensure credibility, consistency, and ethical behavior in valuation work, they are applied in slightly different contexts and with varying emphases. Understanding how they align and where they differ can help appraisers remain compliant and instill greater confidence in their work.

USPAP, established by The Appraisal Foundation, serves as the authoritative framework for appraisals across the United States. It is required by law for real property appraisers and widely adopted in equipment and business valuation contexts. USPAP emphasizes principles such as ethics, scope of work structure, reporting requirements, extraordinary assumptions, and hypothetical conditions, all topics critical to preparing and presenting an independent valuation. 

The NACVA’s Professional Standards were created specifically for financial professionals conducting business valuations, litigation support, and related consulting services. NACVA standards overlap with USPAP in terms of ethics and disclosure, but also emphasize unique aspects of business valuation, such as engagement types, accepted methodologies, independence, objectivity, and work file documentation.

Where USPAP provides universal principles, NACVA offers more tailored requirements for the business valuation profession.

Key Similarities between the two include objectivity and independence, reporting transparency, limiting conditions disclosure, and professional appraiser competence.

Key Differences include a broader discipline range, with USPAP covering virtually any type of accredited valuation, while the NACVA focuses solely on financial and business appraisal. In addition, USPAP compliance is mandated in many cases by law or regulation, while NACVA compliance is required for its members.

Failing to follow USPAP can expose an appraiser to regulatory risk, while ignoring NACVA standards can jeopardize one’s credibility as a certified analyst. If you’re a business appraiser, the most reliable practice is to understand the requirements of each and ensure your reports satisfy both sets of expectations.

USPAP and NACVA standards ultimately share the same goal: to produce reliable, credible, and ethical valuations. While USPAP provides an overarching regulatory framework, NACVA adds layers of specificity tailored to business valuation professionals.

A business appraisal is a powerful tool that provides clarity, credibility, and confidence for business owners, investors, and other stakeholders. There are several common reasons why owners and their advisors require a formal certified valuation. Understanding these purposes can help you anticipate when and why an appraisal might be necessary.

Buy/Sell

Whether you’re an owner looking to sell or a buyer assessing an opportunity, a professional valuation establishes a fair value for the company. This provides a more equitable opportunity for each side and a foundation for negotiations.

Succession & Estate Planning

Business owners will need an appraisal as part of such things as succession planning, gifting shares, or transferring ownership to the next generation. For estate purposes, the IRS requires supportable valuations to establish tax obligations and support asset transfers.

Partnership Buyouts and Disputes

>When a business partner exits—whether voluntarily through retirement, or because of a dispute, an appraisal helps determine a reasonable buyout price. Having a credible third-party valuation reduces conflict and allows the parties to negotiate fairly.

Divorce Settlements

In divorce cases, businesses are often one of the most valuable marital assets. Courts require a certified, independent third-party appraisal to fairly divide assets and avoid contentious disputes over the company’s worth.

Financing and Investment

Banks, private equity firms, and investors often request a business appraisal before providing funding for loan underwriting and sound investment decisions.

Strategic Planning and Growth

An internal valuation assessment will allow business owners to understand better the company’s strengths and weaknesses, including the key drivers of value and potential risk factors, helping owners make more informed decisions for growth.

No matter the purpose, a business appraisal provides a clear picture of value at a specific point in time. Whether you’re planning for the future, navigating a legal process, or considering a sale, having a well-supported valuation can save time, reduce conflict, and protect your financial interests.

Starting a business with a partner often feels like a dream scenario. You share the workload, pool your resources, and bring complementary skills to the table. But over time, even the strongest partnerships can strain, leading to disagreements or, worse, a complete breakdown of the relationship. Understanding the why and how in these scenarios up front can potentially avert them down the road.

Partners may have different visions of success, pertaining to areas such as growth, profitability, and company size, among others. Without alignment, one partner may want aggressive expansion while the other prioritizes stability, leading to tension and resentment.

As the business develops, workload issues can start to put strain on the relationship where one partner believes they are bringing more to the table than another. This can lead to arguments about compensation and recognition.

Financial and investment disputes are among the most common partnership killers. Disagreements about reinvesting profits, handling debt, or personal withdrawals can quickly escalate if clear policies are not in place.

Fundamental differences in values, work styles, or conflict resolution approaches can make the business environment toxic over time.

A change in one partner’s priorities due to family, health, or personal interests can affect their commitment to the business, leaving the other partner feeling abandoned or overburdened.

Trust is everything. Issues such as unethical behavior, misuse of funds, or going behind each other’s backs break trust and are often irreparable in a business relationship. When partners stop having open and honest conversations, small misunderstandings can snowball into major conflicts. Regular, structured communication is essential for resolving problems early.

While not all conflicts can be avoided, many can be minimized through careful planning. Create a comprehensive partnership agreement from day one. Set shared goals and revisit them regularly. Define clear roles and responsibilities so no one feels overburdened. Commit to open communication and scheduled check-ins. Pre-plan for “what if” scenarios such as buyouts, dissolutions, or disputes.

Business partnerships can be incredibly rewarding, but they require as much care and maintenance as any other important relationship. By addressing potential conflict points early, you’ll have a better chance of keeping your partnership and your business on track.

In today’s fast-paced and highly competitive marketplace, business valuation professionals are operating in an increasingly crowded field. With more firms and solo practitioners offering appraisal services than ever before, clients have plenty of options, along with high expectations regarding reliability, turnaround time, and pricing.

The growth in demand for business valuations, driven by multiple purposes such as purchase and sale, litigation support, estate planning, and financing, has attracted professionals from various backgrounds. Accountants, consultants, brokers, and even software platforms are vying for a piece of the valuation pie. This proliferation has inevitably driven competition, not only in terms of volume but also in specialization and perceived value.

As with many professional services, some buyers make their choice based primarily on price. This strategy can be risky for clients. A low-cost provider may cut corners, rely too heavily on templates, or lack the experience and accreditation necessary to appraise businesses effectively. This could easily result in unsupported or even misleading conclusions. Inaccurate valuations can lead to legal, financial, and reputational consequences for appraisers.

Automated tools and AI-based valuation platforms have entered the scene, offering quick and cheap alternatives. While these tools may suffice for informal or early-stage valuations, they cannot replicate the insight and judgment of a trained professional, especially when the stakes are high.

Fee pricing will always be a principal factor in a client’s decision-making process. To most buyers and sellers, valuation work is a discretionary expense, and they will have a tough time paying extra when there are alternatives out there.

To thrive in this competitive market, certified valuation professionals must emphasize the added value they bring to the table, such as high-quality credentials and experience, excellent communication skills, tailored services, timely deliverables, and post-report consulting.

In a competitive business valuation market, it is not enough to do the bare minimum to complete the work. Appraisers should educate clients, demonstrate their value, and differentiate through quality, transparency, and service. The market may be crowded, but there’s always room for expertise that consistently delivers meaningful, supportable results.

In the world of professional valuation, whether for equipment, real estate, or businesses, the question of refundable versus non-refundable appraisal fees may arise when speaking with clients and colleagues. While it may seem more consumer-friendly to offer a refund if the client cancels the appraisal after engagement, there are sound professional and practical reasons why appraisal fees should be non-refundable.

Appraisers begin expending time, effort, and professional judgment from the moment the lead is generated through the initial stages of engagement. Significant up-front work will occur, including scope of work quotes, engagement documentation, initial research, data requests, client communication, and preliminary analysis. A refundable structure doesn't reflect the reality that much of the value provided happens early in the process.

Appraisal work is often collaborative. The client needs to provide documents, fill out forms, and offer insights into their business and associated assets. A non-refundable fee signals that the client is serious about the process, leading to better communications and follow-through. It reduces instances where clients delay or abandon projects without regard for the appraiser's time.

Valuation professionals are often booked out with multiple engagements. Accepting a job means reserving time on the calendar, potentially turning away other opportunities. A non-refundable fee protects against lost income when a client backs out midstream after that time has already been allocated.

Like legal or consulting services, an appraisal is a professional opinion based on the appraiser's training, accreditation, and analysis. The fee is not just for delivering a report but also includes the application of expertise. Just as you would not expect a refund from an attorney after they've spent hours preparing your case, even if you settle early, the same logic applies to appraisal work. In dispute cases, especially, the knowledge that an independent valuation is ongoing may actually facilitate a settlement before the results have been delivered.

Appraisers must remain independent and objective. Offering refunds could create perceived or real pressure to align conclusions with client expectations to avoid dissatisfaction or chargebacks. A clear, non-refundable fee structure reinforces the arm's-length, professional nature of the engagement.

In summary, credentialed appraisers provide unbiased, researched opinions that often influence major financial and legal decisions. A non-refundable fee structure reflects both the value of that expertise and the commitment required by both parties to ensure a successful outcome. Make sure to set this expectation up front so there are no surprises and help create a mutually respectful working relationship from the start.

In business, cost-conscious decisions often make good sense. However, that is not the case when it comes to valuing your company. While it may be tempting to take the cheapest appraisal option, cutting corners in this area can lead to costly mistakes. A certified business valuation is more than just a quick back of the napkin calculation, it is a detailed, defensible report that can impact key financial and legal outcomes.

Business valuations are primarily used in critical situations such as partner buyouts, divorce settlements, estate planning, mergers, acquisitions, and litigation support. Opting for a cheap, unaccredited valuation will likely result in an analysis that is not well-researched and overly generic, leading to inaccuracies that can distort the company's true value. This can result in unfair settlements, poor financial planning, or deals that fall apart in high-stakes situations.

Certified business appraisers follow professional standards such as those set by the ASA, NACVA, and USPAP. These standards ensure thoroughness, consistency, and credibility. Discount valuation services may skip vital steps, use generic software tools, or be performed by individuals without these credentials, putting the reliability of the report in jeopardy.

No two businesses are exactly alike. Industry, market trends, customer concentration, and operational risks all play into a business's value. Low-cost valuations often use boilerplate models with little regard for your company's unique attributes. You end up with a valuation that does not consider many of the specific factors that will impact the value of your operation.

An appraisal that cannot stand up to scrutiny is virtually worthless. If your valuation is ever challenged for tax reasons (the IRS), sale purposes (potential buyers), or in court (judges, arbiters, and jurors), you will need an experienced professional appraiser who can explain and defend their findings. Low-budget services will not provide that kind of post-report support.

What looks like a good deal today can create headaches and expenses tomorrow. If a valuation needs to be redone due to its inaccuracy, you will end up paying twice. Worse yet, poor decisions made on the basis of a weak valuation can carry long-term financial consequences.

In summary, a quality business valuation is an investment, not just a line-item expense. It requires experience, research, and professional integrity. While it may cost more upfront, a thorough, defensible appraisal will provide peace of mind, strategic insight, and long-term value. When it comes to understanding what your business is truly worth, cheap is not the way to go.

Business appraisers typically value "for-profit" enterprises that are driven by revenue and bottom-line income. But what happens when the entity in question is a nonprofit organization, one with no shareholders, no dividends, and no motive to generate profit? Can a nonprofit be valued? The answer is yes, though the methodology and purpose behind such an appraisal are quite different.

There are several reasons a nonprofit organization may require a formal valuation, such as M&A transactions, internal strategic planning, donation or gift purposes, litigation or dissolution, and financial reporting.

Unlike for-profit companies, nonprofits do not generate income for distribution. As a result, traditional valuation methods may not apply in the conventional sense. Here are some thoughts on possible approaches:

1. An asset approach may be relevant and involves calculating the fair market value of the organization's tangible and intangible assets minus liabilities.
2. A "Cost to Create" method estimates how much it would cost to recreate the nonprofit from scratch. This includes the cost of acquiring similar assets, staffing, and establishing the same level of community reach or donor base.
3. A modified income approach may look at the excess of revenues over expenses and whether the organization has a sustainable surplus to support its mission.

Suppose there is any similar nonprofit company market data available. In that case, the appraiser may be able to compare it to similar entities in terms of donations received, operational scope, or programmatic output. The market approach may likely be limited or non-applicable, given the uniqueness of many nonprofits.

Valuing a nonprofit comes with unique complications, including:

1. Donor Restrictions: Some funds and assets may be restricted and not freely transferable.
2. Intangible Value: Community goodwill, volunteer labor, and mission-driven reputation can be difficult to quantify.
3. Mission Over Metrics: The value of a nonprofit's impact doesn't always align with financial indicators.

Valuing a nonprofit organization requires a thoughtful approach that goes beyond dollars and cents. It's about understanding the real-world value of services rendered, community impact, and the sustainability of the mission. Whether for strategic, legal, or financial reasons, a professional valuation of a nonprofit provides essential insight into the organization's true worth and future potential.