Business Valuations?

[Roberts]

Does anyone do or have you ever done a business valuation? I get asked about every 4 months whether I do them and while I never have and always pass on the jobs, seems it is something I could be doing.

Anyone do them? If so, did you achieve any special accreditation in this area?

Thanks

[S T]

I did do one

I did do one, obtained the software off of the internet for a fee. Actually 2 different programs, not very expensive. Results were favorable. based on what I had prepared and presented, the business was sold! (Done for a family member)

Private email me and I will give you the links

Sandy

[taxmandan]

I looked at it awhile back, very interesting business. The guru of business valuations is Shannon Pratt, google his name and you'll find alot of information on how to do it right. There are some "certification" associations for valuation experts, the only licensing requirements I found, is that some states require you to be a licensed Realtor. So check your state laws on that requirement.

[Unregistered]

It's very expensive to get certified as a business valuation expert, and ver, very expensive to keep up with the required CPE.

I also started out doing them without the certification behind me, but then I later spent the time and money to get certified. Why? I saw in a couple of situations where other non-licensed valuators were sued because either the buyers or the sellers felt they could have gotten a better deal if the valuator was more knowledgable. Scarry.

[Roberts]

In my business the valuations wouldn't be produced to generate sales but instead used to determine equitable value in a divorce settlement. The attorneys are wanting an impartial valuation before they can continue with negotiations.

I know there isn't a licensing requirement but I'm just wondering if it was really important. They all seem extremely expensive considering I would only do 2-3 valuations per year I'm guessing.

As for the software - I've seen a few, will email you for your opinions.

Thanks

[Matt Sova]

Valuations

You are looking at doing valuations for divorce situations? You should get certified. A friend of mine and her husband are going through a divorce, the husband took his business taxes to another CPA here in town (he hates me for taking her side). The new CPA testified that his business is worth nothing without him so the value is $0. On my advice she hired a certified appraiser and he came up with a value of over $400k. Guess which one the courts threw out?

As a CPA, EA, bookkeeper, taxpreparer, etc your opinion is not worth $.02 in a court of law when you are up against someone certified to prepare this type of thing.

Matt

[dsi]

I agree 100% with Matt. You could loose a good client, and face the risk of being sued.

[S T]

Another

We seem to have what is called "forensic" accountants here in So Calif. They somehow specialize in this field and have the needed contacts with the Divorce Attorneys and the Court and are recognized.

Preparing for the sale of a business without any other legal issues, like divorce, estate issues, I don't know what would be needed to prepare a Business Evaluation for a potential sale.

S

[OldJack]

First, check out insurance cost to do that type work. You would be better to stick to what you know and do best.

[Roberts]

1. Forensic accountants are a totally different ballgame than business valuation. This is like saying financial advisers are tax experts - one person may do both but it isn't the same field.

2. If I always stuck with what I knew best, I'd still be bagging groceries like I did in high school. Just maybe life should be about constantly learning and taking on new challenges?

3. Being accredited does in no way lower your chances of being sued. If it did, none of us would need E&O insurance.

4. I already do work in the divorce litigation arena and it is the attorneys asking me to do this work for them in mediation and collaborative cases. I'm not looking at doing $40 million factories but instead focusing on professional offices. Currently they are asking me to value an insurance agency that is probably worth between $100k-$200k. They can't find a business valuation firm to even look at a small project like that.

[jainen]

someone to blame

>>They can't find a business valuation firm to even look at a small project like that<<

Why do you suppose that is? Obviously because the people who know what they are talking about have learned there isn't much chance to make a profit -- potential expenses exceed potential income. There is a kind of threshhold for work like that. If you are only looking at "2-3 valuations per year" you just aren't going to be able to afford the ongoing training and resources you need to do it right.

And when you do it wrong, your clients are going to be unhappy. Maybe very unhappy. In fact, since these are divorce cases they are already very unhappy, and probably looking for someone to blame.

[Roberts]

My experience only comes from my competitor. I do some divorce financial analysis in conjunction with litigation and my only full-time competitor is doing valuations through his firm. His hourly rate is $250 per hour and for basic financial analysis for a couple his retainer is $4,000. His business valuation retainer starts at $10,000 regardless of the size of the company. A company with $100-300k in value isn't an attractive valuation because they have virtually zero opportunities for future litigation support. Litigation support is how he makes a living and the valuations are a funnel to that support.

Most companies of the size I'm looking at can only get an independent valuation from someone looking to broker the business (They'll take a loss on the valuation to get the commission). I would be brought in to provide a fast valuation so that they can get a firm idea of the value of the business. In the current divorce I'm working on the husband says his agency should be valued around $150k (1x revenue) but the wife says it could easily get $300k (2x revenue) because that's what a business broker told her. The attorney just wants someone to step in and give an unbiased opinion of the value.

I've been doing personal pension and stock option valuations under this work environment for years. The attorney's just want an unbiased opinion of the value based on sound principles that can be easily explained. I've yet to find anyone who could understand how a stock option valuation was determined. ) I charge $125 per hour for these and am thanked for being so reasonable when the only alternatives are about 2x as much.