Choosing a Business Valuator

A business valuation is critical to establishing a purchase or selling price, developing a business strategy, or assisting with tax planning.   A Chartered Business Valuator (CBV) is a nationally recognized professional who can value a business. Given the importance of a business valuation here are some tips for choosing a business valuator.

Seek expertise

It’s helpful to seek a valuator who has in-depth knowledge of the industry in which the business operates. You should hire a valuator who can effectively communicate technical and complex valuation methodologies in a simplified way. This will ensure you understand the valuation process from start to finish. Also, a CBV can identify value drivers of the business which can help you maximize the return on investment.

Seek reputation

You will want to engage a CBV from a firm that has been in business for several years. A reputable firm will provide sound advice, service in a timely fashion, and transparency through its collaborative approach. A firm with a strong reputation will be recognized by third parties such as bankers, lawyers, and brokers.

Next steps

Once an engagement letter has been signed, the valuator will need various financial information to prepare the valuation report. The required information can vary but typically includes the following:

  • Financial statements for the past three to five years
  • The most recent corporate tax return
  • A list of discretionary and non-recurring or one-time expenses
  • Management compensation
  • Unanimous shareholder agreement(s)
  • Capital asset listing
  • Inventory listing

After the preliminary analysis is completed, the valuator will have detailed discussions about the operations of the business to determine the key success factors that could affect the valuation. The valuator will also set up a time to make an on-site visit to better understand the business.