Business Valuation Blog | Understanding Buying / Selling a Company

As accredited appraisers, we are frequently asked how experienced we are in a particular industry when potential new clients inquire about our expertise. Most appraisers are considered “generalists” and cannot afford to focus a significant amount of time on any one industry if they want to maintain steady revenue and grow their business. There are numerous industries in which companies operate, and it is important for appraisers to apply their skills within all of them to create a diverse valuation practice.

Appraisers go where the opportunities take them, regardless of the industry in which their clients operate. If a valuation expert has been working professionally for a long time, they have likely completed a certain number of appraisals in many different industries, which increases the odds they have experience in the ones they are being asked about.

It’s important for clients to understand the distinction between industry and valuation expertise. They are two very different service provider segments that will intersect at times, but will demand professionals focus their expertise on one or the other. As an appraiser, it is not difficult to become generally well-versed in the industries in which they work when conducting appraisals. Combining the market research developed for each project with direct client communications enables them to understand what they need from an industry perspective to complete an effective valuation.

The standards and methodologies learned and employed by certified and accredited appraisers apply to every industry they work in. All the educational time and effort, as well as the application of these accepted approaches, are consistent for any company being valued. The more experience a valuation expert has, the more it will reinforce the understanding that employing these methods will provide greater support and credibility to their analysis and reporting process.

It is important to understand the nuances of the industry in which you are valuing. There are databases and market sources that provide this kind of information at the appraiser's disposal, if they know where to look. This data will influence the valuation conclusions and is typically based on a considerable number of comparable companies within the same industry.

Regardless of an appraiser's level of experience in any industry, they can provide a credible, supportable valuation of your business if they hold the proper credentials that make them experts in the appraisal industry.

When you're considering having a business appraised, it's quite often only something you have done once in a very great while. In fact, many business owners choose to only have their business value determined during the sale of a business. Unfortunately, that means that many business owners aren't quite sure what they should look for when hiring a business valuation expert. What should you look for in a business appraiser? Here's a quick look to help get you started.

What should you look for when hiring a business valuation expert?

• Are they a certified appraiser? Many appraisers go through the certification process to help highlight their experience and education. The process of becoming certified can take several months of classes, documentation and similar preparation work. This means that they're dedicated to the industry and are planning on sticking around. The certification process also teaches the appraiser which calculations should be used in which circumstances, with methodologies that have stood up to solid scrutiny in legal, financial, insurance and tax circles.
• Do they have experience in your industry? Industry experience allows a seasoned appraiser to determine whether the current market situation is a brief hiccup or part of a larger downward trend. It also provides an appraiser with an idea of what a business in your industry should look like, giving them a solid basis upon which to compare your business.
• What is their past experience? If the appraiser you hire doesn't have a lot of experience valuing businesses in your industry, you may get less accurate information from the appraisal report. Have they come out of a sales position or real estate background, or an accounting background? This may somewhat impact their approach to how your business is valued, but either should be able to provide you with a sound appraisal.
• Can they provide you with references? Any experienced certified appraiser should be able to provide you with references as to the quality of their work. Don't settle for simple client testimonials, which may be falsified or from a few choice clients who were particularly pleased with the appraisal work that was provided. Take the time to follow up with at least one or two of the provided references to ensure the appraiser has a solid record of good work behind them.
• Are there any complaints with commerce organizations or review sites? Whether it's the Better Business Bureau, Google, Facebook or any number of other services where reviews can be left, take a look at whether the appraiser has left any bad experiences behind. If the complaint deals with issues that are not related to the appraisal process, such as odd business hours or a difficult to find office location, you may want to ignore it, but if they deal with serious concerns in appraisal practice, you may want to go elsewhere for your business appraisal.

By knowing what to look for in a business valuation expert, you're able to make a more educated selection when faced with several possibilities. This helps ensure that you're making a solid choice that will benefit your company not just now, but also in the future, based on how you choose to act on the information the appraiser provides. Instead of having to guess which business appraiser will be the best fit for your company, you'll now have a better idea of what an experienced, qualified business appraiser looks like.

When it comes to the valuation of a company, it can be easy to consider the need for a business valuation expert and the business appraisals they provide to be a one-time thing. But if you do use this approach, you may be missing on some of the best benefits business valuations can offer your business. Could it be that you need to have a business appraisal performed more often or need to learn how to take the best advantage of your opportunities? Here are a few reasons why business valuation experts can help your company soar.

5 reasons why your company needs a business valuation expert

1. Changes in your business' leadership. When you have a change in ownership or leadership in your business, a business appraiser can help you navigate who gets what. When a partner leaves or a divorce happens, a professional business appraisal helps you determine how much that person's share of the business amounts to and how that cost can be handled without breaking the bank. If the individual leaving the business is doing so under a less than friendly situation, the business valuation will hold up to strong scrutiny if a lawsuit becomes necessary to settle the matter.
2. Shifts in the market. Is the market going through a boom or a bust cycle that is affecting your profitability? How can you stay ahead of the shifts to improve your business' overall standing? A business appraiser can help you determine what changes you can make to keep up with those changes and position your business to come out ahead by taking advantage of the situation. 
3. Changes in the industry. Has digitization or other new discoveries or technologies caused disruptions in your industry? When these types of changes are occurring, it can be really difficult to figure out where to position your business. Deciding whether you should embrace the changes or ride out the disruption is easier when you know what's going on overall.
4. Shifts in business focus. Are you considering entering a new sector or changing the direction of your business overall? By knowing what's going on in those areas, you can prepare your business for that shift to ensure that it will go smoothly and that you'll be able to make a successful shift.
5. Changes in your business' profitability. Has your business become less profitable and you need to know where you're losing money? Maybe you have more money coming in than expected and are trying to figure out how to take advantage of it? A business appraiser can tell you what's going on and how to shift your focus to the change.

By keeping these reasons in mind as you go through your daily operations, you can ensure that you can help your business take advantage of any opportunities that arise without having to worry that you're putting your business at unnecessary risk. Working with your business valuation expert means you can safely grow your business while being guided by expert knowledge of your industry, competitors and business. But what if you're not currently working with a well-qualified business valuation specialist? If you need to be connected with a valuation expert who has experience in and a solid grasp of your industry, please feel free to contact us today. We'd be happy to match you up with the right business appraiser for your company.