Why do I need to have my business appraised? There are many reasons that businesses are appraised; estate & gift tax matters, mergers and acquisitions, litigation, and business planning are some of the many uses. A properly documented and prepared report can actually help you avoid costly consequences. So if you’re concerned with over-paying estate taxes, being able to defend the proper value in a litigation proceeding, or selling your business for less than its worth, you need a business valuation specialist.
What standards exist for business appraisers? While there are no licensing requirements for business appraisers, the Congress of the United States created the Uniform Standards of Professional Appraisal Practice (USPAP), which encompasses the business appraisal profession. In addition, Revenue Ruling 59-60, developed by the IRS, is a set of parameters defining the appraisal process for tax matters. At Wisehart, Inc., our reports adhere to all Federal Standards, IRS Standards and the detailed standards mandated by The Institute of Business Appraisers and American Society of Appraisers.
Can a “Ball Park” estimate of value be determined by looking at the numbers? The process of valuing a business is much more complex than just number crunching. Every business has risk and value drivers that must be determined. This requires research, analysis and experience. The entire process can take on average from 25 to 40 hours, or more to complete. Every valuation is customized to the client’s needs and scope of service. There are no shortcuts – only sound analysis and adherence to generally accepted appraisal methods in order to render a defensible opinion of value.
Can a formula be determined for the valuation of a business? Formulas do not exist in the valuation of closely held businesses. While there are “rules of thumb” available to the appraiser, each business is unique in terms of profits, growth, future outlook, risk, management and many other factors. In addition, value change over time. They are dynamic. A formula that could work today, say in a buy-sell agreement, may produce a totally incorrect value when fair market value is needed most. This is why an appraiser is hired to determine the influences of the market today.