Business Valuation Blog | Understanding Buying / Selling a Company

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're getting ready for a business valuation, it's important that you hire the right professional for the job. A Certified Valuation Analyst (CVA) has had extensive training to receive their certification, which prepares them for a wide range of valuation situations. This means they know exactly what needs to happen to calculate an accurate valuation of your company. Here's a quick look into what's involved in the certification process and why it matters to your company's valuation.

What's required to become a CVA and why does it matter?

Certified Valuation Analyst Qualifications

To be qualified as a Certified Valuation Analyst, there are certain standards that must be met. If the appraiser is not a CPA, a business degree is required from an accredited educational institution. A minimum of two years of full-time experience in business valuations, significant enough contributions to be listed on 10 or more valuation reports or demonstrating substantial knowledge of business valuation theory, methodologies and practices is required. A sample case study or actual Fair Market Value valuation report will need to have been prepared within the past year and must be submitted for peer review. Attendance at an optional 5-day training program is recommended, but not required. Three personal and three business references are required, as is passing a comprehensive 5-hour multiple-choice/true-false proctored exam. Finally, an application must be completed and submitted with the required paperwork. After applying for the Certified Valuation Analyst designation, they'll need to pay a fee or apply for NACVA membership, complete required continuing education coursework and meet the Tri-Annual Certification requirements to maintain the designation.

Benefits of using a Certified Valuation Analyst

Obviously, becoming a Certified Valuation Analyst is a lot of work, so why should you hire one to perform your business valuation? The amount of education that is required ensures that the analyst has a great deal of knowledge about accounting and appraisal, giving them the tools they need to get the job done right the first time. Because they've been through such an extensive educational process with a required experience component, the calculations they perform and the methodologies they use in determining business value ensures that your business valuation report will reflect a very accurate value for your company. The continuing education portion means that the analyst will be staying up to date with the latest changes in appraisal theory and practice.

All of these aspects come together in an appraisal professional who is able to develop the right approach to your situation, calculate your company's value based on proven methodologies and is able to back up those methodologies with proven facts as the methodologies used have been tested time and again in a wide range of circumstances. This helps ensure that your valuation report will hold up in legal, insurance, financial and tax circles.

As you can see, the process of becoming a Certified Valuation Analyst is complex and involved, but it produces valuation specialists who can deliver an exacting valuation of your company adapted to your current circumstances. Though you have options in how your business is valued, a CVA is the best way to ensure that those values are accurate and will hold up well to strong scrutiny in a wide range of situations. Using a certified valuation specialist provides you with the best value for your money.