Business Valuation Blog | Understanding Buying / Selling a Company

Acquiring a formal certification or accreditation is critical in the valuation profession and typically requires a few years of hands-on experience and the successful completion of several educational courses to gain the initial recognized title. Once acquired, there is usually a renewal process every 3-5 years depending on the organization providing the designations, whereby a minimum of 20 annual continuing education hours are needed to maintain and extend it beyond the initial period.

Staying current on topics such as ethics, report writing requirements, industry/market developments, tax laws, and economic fluctuations is important so that appraisers can continually be aware of developments in these areas in order to provide ongoing credible valuation work.

There are a few different ways valuation professionals can accomplish these continuing education requirements. The most common is attending courses and seminars provided by their primary recognized associations, such as the American Society of Appraisers (ASA), the National Association of Certified Valuators and Analysts (NACVA), the Appraisal Institute, or the Appraisal Association of America.

Prior to the development of online course offerings, appraisers could only attend courses in person, which was more time-consuming and costly. Virtual classes are generally less expensive and allow individuals more flexibility in terms of scheduling. Some of these associations also have local chapters that meet throughout the year and create learning opportunities on a more personalized level.

Another option is to attend conferences, trade shows, and seminars provided by third-party organizations that specialize in areas such as finance, tax, accounting, economics, and specific business industries that the appraisers might focus on. Over the last few years, many of these events are now offered both in person and virtually.

The appraiser is required to track, log and report their hours to the sponsor organizations who will formally provide the recertification or reaccreditation once completed. These steps are crucial to the long-term credibility and continuing validation of both the individual appraisers and the valuation industry as a whole.

When you are seeking the services of an appraiser to value your business, ask them if they have maintained their continuing education requirements that pertain to their specific designation and their affiliated organization.

When you're considering having your business appraised, your research will likely lead you to the NACVA (National Association of Certified Valuators and Analysts), which provides a wide range of services, including certifications, for business appraisers. This designation can make a big difference when it's time to have a company appraisal performed. Here's a summary of what the NACVA is and how appraisers become certified.

Prior to the formation of NACVA, the methodologies used by these appraisers, accountants, and other business professionals followed a wide range of approaches and analyses. There was no consistency in these procedures which ultimately led to scrutiny and doubt as to the reasonableness, reliability, and independence of the conclusions. When audits were performed on a number of the businesses involved, it was determined that formal guidelines and procedures were needed to govern the valuation industry.

In 1990, the NACVA was founded to implement and support the business marketplace. It developed and tested methodologies for estimating business value under a wide range of circumstances. Over time, these methodologies were accepted in accounting, legal, insurance, financial, and tax circles, and were determined to provide the most accurate picture of business valuation. The NACVA has certified thousands of financial and accounting professionals, including CPAs and valuation specialists. The majority of that membership is certified in one of the Association's three main programs: Certified Valuation Analyst or CVA, Accredited in Business Appraisal Review or ABAR, or Master Analyst in Financial Forensics or MAFF.

The independence and consistency of the methodologies required to be considered and implemented in every appraisal under these guidelines have been critical to establishing a strong reputation of integrity. The business appraisal will also include insights into your company's performance and operations, strengths and weaknesses as well as the position within specific markets and industries you focus on.

Becoming a Certified Valuation Analyst within the NACVA involves a combination of education, experience, and formal testing, that takes years to earn. This designation gives the appraiser direct access to the resources of the association and requires them to follow the methodologies and approaches approved within. Continuing education is also a requirement to stay current with changes and updates to the program.

By being aware of what the NACVA is and how its certified appraisers can bring added value to your business, you can use that knowledge and the quality of their reports as leverage at the negotiating table. Working with a certified appraiser ensures that your business valuation has been determined using standardized methodologies that will stand up well to strong scrutiny in a wide range of areas, including legal, insurance, financial, and tax circles.

When you need to have your company appraised, business valuation certification can be the furthest thing from your mind. However, it's a very important thing to check before you hire a business appraisal to ensure that the appraisal they provide you with will meet particular standards and hold up to strong scrutiny in a wide range of circumstances. But beyond that, why will using a certified business valuation process help provide your company with strong benefits? Here's a quick look to help get you started.

How does a business valuation certification provide you with a better appraisal?

When you make sure that you use a certified appraisal process, it helps ensure that the final value is accurate and calculated based on solid facts. During the process, a trained, experienced appraisal professional takes the time to study a wide range of aspects about your company, industry and market. This ensures that the value that is calculated for the appraisal report takes all reasonable aspects of the company's value into account. 

For example, if your company has been having strong growth, but is not remaining innovative within your industry or the market is failing rapidly, that will impact your company's overall value. An excellent example of this is the changes that oil companies have seen over the past few years. Petroleum-based companies can quickly go from running at a profit to running in the red as oil prices shift on the market. When prices drop and the industry slows down, a company that had a great value during boom times may suddenly find itself virtually worthless.

Fortunately, the depth of information and insight available in a business valuation can provide you with the tools you need to help bring your company through troubled waters successfully. It helps you improve the value of your business so that if you're working on an exit strategy, you can maximize your profit from the sale or transfer of your company. But exactly how do you take advantage of the information in the valuation report?

Because a valuation looks at your company as well as the competition, the report may mention where your business is different, both for good as well as for bad. It can look at the state of your equipment and determine whether you're going to need to replace that machinery in the near future or whether it will perform well for new owners for years to come. It determines the value of your reputation in the community, your innovative processes and the strength of your brand.

It can also look at your internal situation. If you have areas where you're increasing your overhead and lowering profitability, learning about those areas from a valuation report gives you the opportunity to make changes to those aspects. This can very quickly increase your profitability and cut your expenses, making it much easier to quickly make gains on your final sale price.

By using business valuation certification when having your company appraised, you can rest assured that the money you spend on the appraisal will be well invested. A certified appraisal ensures that the valuation will hold up well to strong scrutiny and will have accurate information on a wide range of potential issues for your business. This means you can depend on it when making important decisions about your company both now and in the future.