Business Valuation Blog | Understanding Buying / Selling a Company

Why and How Business Partners Can Experience a Falling Out

Posted by Business Valuation Specialists LLC on Aug 11, 2025 7:30:00 AM

Business partners working to prevent a dispute in relationship

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.

Tags: partnership, small business

Navigating the Competitive Business Valuation Market

Posted by Business Valuation Specialists LLC on Jul 28, 2025 7:30:00 AM

navigating the competition in busiiness valuation

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.

Tags: Business Appraiser, business appraisal services

Why Appraisal Fees Should Be Non-Refundable

Posted by Business Valuation Specialists LLC on Jul 14, 2025 7:30:00 AM

appraiser and clients agreeing to collaborate on appraisal project

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.

Why Getting a Cheap Business Appraisal is a Bad Idea

Posted by Business Valuation Specialists LLC on Jun 30, 2025 7:30:00 AM

Company owner happy with professional business valuation

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.

Tags: Business Appraiser, certified appraisal

Valuing a Nonprofit Business

Posted by Business Valuation Specialists LLC on Jun 16, 2025 7:30:00 AM

Professional appraisal of nonprofit business

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.

Tags: valuing a business, nonprofit

The Role of Business Valuation for Internal Company Planning

Posted by Business Valuation Specialists LLC on Jun 2, 2025 7:30:00 AM

Internal company planning meeting with a business valuation appraiser

If you own a small business, knowing what your company is worth isn’t just about preparing for a sale or attracting investors. It is also a powerful tool for internal planning and strategic decision-making. Business valuation provides insights that go far beyond a price tag, helping leadership make informed choices about growth, resource allocation, succession, and performance tracking.

Many businesses overlook valuation as a strategic planning tool. Understanding the value of your company helps you clarify financial health, shedding light on your company’s assets, liabilities, revenue streams, and risks. It can also assist in setting measurable goals by establishing a benchmark value, which allows you to track the impact of strategic initiatives over time.

Other internal uses for an updated business valuation include support for budgeting and forecasting, evaluating existing investments and potential expansion, succession planning, and ownership changes.

Different valuation approaches may be used depending on the nature of your business and the information available. Credentialed, experienced business appraisers will consider the three approaches to value (Market, Income, and Net Asset) while relying on those that make the most sense for your specific company. For example, the income approach may be a better method if you’re looking at future profitability, risk, and growth potential, all core factors in long-term strategic planning.

Integrating an appraisal into your regular business cycle helps you identify value drivers and detractors, monitor financial trends, adjust strategies proactively, and increase organizational alignment with long-term goals.

Consider a formal appraisal update when you’re holding strategic planning sessions or considering major changes in management or ownership. In addition, during periods of significant growth or after downturns, during a merger, or while prepping for financing and debt restructuring.

Business valuation can be a strategic mirror for internal reflection. When engaging regularly with a seasoned professional appraiser enables smarter planning, sharper fiscal management, and more resilient growth strategies.

Tags: business appraisal, planning

Business Appraisers as Post-Report Consultants

Posted by Business Valuation Specialists LLC on May 19, 2025 7:30:00 AM

Business appraiser consultiing with client post report

When most people think of business appraisers, they envision a formal valuation report delivered for a specific need, whether for purchase and sale, divorce settlement, litigation support, or estate planning. However, the role of a valuation professional doesn't have to end when the report is submitted. In fact, engaging your appraiser as a post-report consultant can provide ongoing value that helps you act strategically on the valuation findings.

A valuation report is more than a number; it's a diagnostic tool that contains insights into your company's financial health, risk profile, industry standing, and operational efficiency. Business owners and stakeholders often find that they need help interpreting those insights and translating them into actionable strategies. This is where the appraiser steps in as a consultant.

Suppose your transaction continues to develop after the appraisal report is delivered. In that case, additional insights pertinent to the valuation and its role in ultimately closing a deal can be had through post-report consulting. For example, the appraiser can assist during negotiations and provide clarity on valuation assumptions. This may include rebutting opposing appraisal estimates or explaining the rationale behind valuation multiples. By identifying value drivers and detractors in the report, appraisers can help management focus on improving key metrics to enhance future valuations.

If a valuation becomes the center of a legal dispute, the appraiser can serve as a neutral expert or advisor, supporting attorneys and their clients with context and clarity. Business appraisers may also assist in interpreting their valuation in the context of family transitions, gifting, or employee ownership plans.

A valuation is a snapshot in time. Business owners who treat it as the end of the process may miss out on the deeper benefits of working with a professional who already understands their company. Post-report consulting transforms the valuation from a static document into a dynamic tool for growth, governance, and decision-making.

Business appraisers are more than number crunchers; they are strategic advisors. When you bring them in after the valuation report is complete, you gain a partner who can help unlock, preserve, and grow the value of your business over time.

Tags: valuation consultant, business appraisers

How to Weight Prior Years’ Results When Valuing a Business

Posted by Business Valuation Specialists LLC on May 5, 2025 7:30:00 AM

Business appriaser Weighting previouis years' results

Historical financial performance plays a key role in appraising small businesses; however, not all years are created equal. Economic cycles, management changes, and external shocks can skew one year's numbers compared to others. That is where weighted average valuation comes in; a method that applies varying importance (or "weights") to different years to better reflect the company's true worth.

Weighting is a technique that assigns more importance to certain years over others when calculating average performance metrics, such as gross revenue, EBITDA, or net income. This is often necessary due to the possibility that recent performance is more relevant to current and future expectations. In addition, outlier years due to economic downturns or windfall profits may distort the average. This has become even more prevalent since COVID-19, as both 2020 and 2021 results for many companies may be skewed dramatically in different directions.

The weighting of prior years is somewhat subjective, and the appraiser should rely on their experience and expertise while making common-sense decisions as to how to apply this methodology.

One option is to equally weigh the prior 3+/- years of performance if the company shows a steady level of revenue and net income. This is fairly straightforward but can mask more recent trends and future growth forecasts in the company.

Incremental weighting may be more appropriate in certain instances with recent years given progressively more weight. This drives the emphasis of current performance without completely neglecting older operational periods.

In some cases, especially with newer businesses just getting a foothold, the appraiser may rely 100% on the most recent income and balance sheets as they represent the first full period of operation with everything running in full swing.

The volatility of the market or industry may play a part in this decision as well. If performance in a given industry is overly cyclical, relying on a broader period may smooth out the revenue swings. In contrast, companies showing steady growth year over year may determine a need to rely on more recent performance only.

In conclusion, the weighting of historic financials is an important component of business valuation and can provide a more balanced picture of a company's performance. Whether buying, selling, or just looking at internal strategic planning, speak with your certified valuation professional to discuss this in more detail when engaging in an updated appraisal.

Tags: Business Valuation, Business Appraiser

Extraordinary Assumptions vs. Hypothetical Conditions in Valuation

Posted by Business Valuation Specialists LLC on Apr 21, 2025 7:30:00 AM

Appraises reviewing business valuation concepts on a report

In the world of valuation, clear and accurate communication is essential. Two concepts that often create confusion, especially among clients and newer appraisers, are extraordinary assumptions and hypothetical conditions. While they may sound similar, they serve very different purposes in an appraisal report and can significantly affect how a value opinion is interpreted.

An extraordinary assumption is something the appraiser presumes to be true for the sake of the analysis, even though it may not be certain at the time of the appraisal. It is typically considered more common in its use and implies that while the assumption could be true, it hasn't yet been verified.

One example would be where a business is valued at a future date using forecasted data, which includes the assumption that significant investments will be made over the course of that future period. This assumption would be considered "extraordinary" because if it turns out to be false, it could significantly affect the value conclusion.

A hypothetical condition, on the other hand, assumes something that is known to be false as of a current or retrospective date but is taken as true for the purpose of the analysis.

This type of condition is essentially a "what-if" scenario. It is used when the appraiser is tasked with analyzing a situation that doesn't reflect the present reality of the business, such as a hypothetical change to the balance sheet or income statement, to show how the company may be more profitable under a restructured condition.

Both extraordinary assumptions and hypothetical conditions are recognized under the Uniform Standards of Professional Appraisal Practice (USPAP) and must be clearly disclosed in the report.

Using them incorrectly can lead to misleading or non-credible appraisal results. More importantly, readers of the report, such as business owners, lenders, investors, or courts, need to understand whether the value opinion depends on something that is uncertain (extraordinary assumption) or flat-out not true (hypothetical condition).

Understanding the difference between these two concepts ensures the credibility, clarity, and compliance of an appraisal report. When used properly, extraordinary assumptions and hypothetical conditions allow appraisers to address real-world complexities with professional rigor.

Tags: Business Valuation, Business Appraiser

Importance of Networking with Third-Party Industry Consultants

Posted by Business Valuation Specialists LLC on Apr 7, 2025 7:30:00 AM

Business appraiser building relatioinships with 3rd-party consultants

As a business appraiser, your primary role is to provide accurate, supportable, unbiased valuations. But in today's competitive landscape, delivering high-quality work is not enough. To grow your practice and stay relevant, it is essential to build relationships with professionals whose clients regularly need valuation services, such as financial planners, accountants, attorneys, and business brokers.

The fact is that valuation work complements the role these third parties have with small business owners. They play a critical role in guiding their clients through significant business and financial decisions. At certain points, they will need a trusted valuation expert to support their work.

For example, financial advisors may require business valuations for succession planning, retirement strategies, or wealth transfer. Accountants often need independent valuation work for tax reporting, buy-sell agreements, or compliance-related matters. Attorneys rely on valuations in divorce proceedings, shareholder disputes, estate planning, and litigation support. Business brokers require accurate valuations to set listing prices and help both buyers and sellers negotiate fairly.

When these professionals require appraisal work for their clients, having a go-to expert like you adds value to their service and positions you as an indispensable partner. Working together with a mutual client builds credibility and trust. Over time, you will learn each other's working styles, communication preferences, and areas of expertise. Over time, by delivering accurate, well-documented valuations, they will be comfortable referring you to other business owners in the future.

Building these types of relationships will allow you to grow your valuation practice more efficiently by networking with a single contact for multiple engagements over time. Your client base says a lot about you. Being well-connected with respected professionals elevates your standing in the business community and valuation industry.

In summary, business valuation is a specialized field, but it doesn't operate in a vacuum. Proactively developing relationships with other small business consultants allows you to expand your reach while elevating the quality and value of your service. It's a win-win for everyone involved, especially the client.

Tags: business appraisers, growth