Appraising A Business

Appraisals, valuations or evaluations? A frustrating aspect of the business transfer industry is the inconsistency of terminology. The most misunderstood area of terminology is the use of terms that refer to the process of placing a market value on a business or professional practice. Some call this process appraisal, while others call it valuation or evaluation. One of the largest and most respected business appraisal firms in America uses the term appraisal, and that's good enough for us.

In our opinion, the terminology is not the most critical aspect. What is most important is that the report is provided by a professional not only familiar with the mechanics of appraisals, but more importantly a veteran of the industry with years of experience in the actual transfer of hundreds of businesses.

The need for an appraisal is to determine the real value of a business.
"Ball Park" and "Rule of Thumb" guessing leaves too much to chance. Entrepreneurs need to monitor the value of their business on a regular basis to be sure the value is growing appropriately.

If you are considering the sale or purchase of a business, a good appraisal means:

The business owner will enjoy more credibility and the reputation
   that he/she is someone who does things right

It reduces wasted time in the business transfer process

It is a funding requirement of a purchaser's financial institution

Negotiations with lending institutions and other parties will move
   quicker and with less controversy

A reputation of honesty is established

It makes all parties informed and puts them on the same page

It confirms the price of an appropriately priced business

Appraisals are important for a variety of reasons other than for the sale or purchase of a business. Some of these reasons are:

Gift, estate and inheritance taxes and estate planning

Fair and enforceable buy-sell agreements between    partners/shareholders

Determining the adequacy of life insurance

Corporate or partnership dissolutions

Divorces

Going Public

Going Private

Mergers

Compensatory damage cases

Obtaining financing

Determining the value of your business should never be taken casually.
An appraisal is not a cost…it is an investment in your future. And like every important decision in life, it is important to do the right thing. A good business appraisal is the right thing to do. Contact American Business Connections.

Return to Top of Page