The 5 Biggest Mistakes Made When Getting A Business Appraised

Most business owners will, at some point, want or need to know how much their business is worth. They will be faced with the task of finding someone to perform a business appraisal or valuation. Since this is unfamiliar territory, the owners often make some big mistakes.

Mistake #1 ? Automatically Hiring Your Existing CPA Firm

Business owners often assume that all CPAs are competent in business valuation. In fact, many CPAs have very little or no business valuation experience or training. Don't expect your CPA firm to tell you if they are not proficient in this area. Firms are often reluctant to; turn down additional revenue, admit their lack of expertise, and refer you to a competitor.

Ask your CPA firm if they have any staff that are credentialed and experienced in business valuation. Then get an anonymous list of their prior business valuations by business size and type. Don't be too concerned if they have not valued a company in your same industry. Regular and recent business valuation experience is much more important. If they don't have adequate business valuation experience, ask if they would recommend a firm that does.

Mistake #2 ? Automatically Hiring a Referred Professional

Referrals mean different things to different people, so you must ask on what basis it is being given. If it based on a brief meeting at a networking event, then don't give it much weight. Referrals based on reputation alone are only slightly better. Seek referrals based on first-hand dealings with the referred professional. All referrals, even high quality ones, need to be evaluated further to determine their business valuation competence.

Mistake #3 ? Using Rule of Thumb Formulas

Many business owners believe there is some secret formula that can be used to accurately value their business. There are many rules of thumb and they are not a secret. Rules of thumb can be useful to get a "quick and dirty" estimate, but they have some serious flaws. No one really knows the quality and the quantity of the data on which they are based. The formulas typically use multiples that are expressed in ranges (like 1 to 2 times annual sales) that result in widely varying values. The formulas provide no guidance on how to select an appropriate number within that range. Most importantly, these formulas do not account for the unique characteristics and factors that affect the value of a specific business. If a business valuation will be given to third parties or subject to dispute, rule of thumb formulas just won't stand up to the scrutiny.

Mistake #4 ? Paying Too Little

Business valuations typically cost thousands of dollars. In an attempt to save money business owners often look to get one on the cheap. There are a number of sources on the Internet that will value a business for substantially less cost. The old adage ? you get what you pay for ? applies here. These services use various formulas, proprietary data, checklists, and etc. to arrive at an estimate. Some even come with rather impressive looking reports. In general, these services are just high-priced, dressed-up rule of thumb formulas.

Mistake # 5 ? Paying Too Much

Business valuation firms often set minimum fees and limit the levels of service without regard to the cost restraints of smaller companies. By omitting some valuation procedures that typically aren't relevant to smaller businesses and preparing summary-style reports, firms can legitimately and significantly reduce the cost of a business valuation. A high cost, full scope business valuation is often overkill for a small businesses. Look for a firm that can match your needs more closely to save money. Fees can vary greatly so it pays to shop around. Seek the best professional for the best price, not necessarily the lowest price.

By taking the time to do some basic research business owners can avoid these mistakes, hire a competent business valuation professional, and get the most value for their money.

Copyright 2005 David Coffman

David E. Coffman is a Certified Public Accountant (CPA) who is Accredited in Business Valuation (ABV) and a Certified Valuation Analyst (CVA). He is the author of the "Guide to Selecting the Right Professional to Value Your Business". The Guide provides detailed instructions on how to find, and a comprehensive checklist to evaluate business valuation professionals. The Guide can be downloaded for FREE at his firm's (Business Valuations & Strategies) website => http://www.bus-val-strat.com

How to Choose the Proper Entity for Your Business

First, let me state that I'm not an attorney and the rest of this article... Read More

What Can I Realistically Earn In A Lease Purchase Business?

If you're looking at Lease Purchasing as a business, you'll obviously want to earn much... Read More

How to Create Cash Flow Out of Thin Air!

Want to see a trick every real estate investor will love?From the Desk of Thomas... Read More

Advantages and Disadvantages to Selling a House on Your Own

As with any business transaction, there are pros and cons to selling your own home.... Read More

If You Move Yourself

You'll want to take some items in your own car when you move, and that's... Read More

How to Become a Successful Real Estate Developer

Real estate investment and development has never been a more popular pastime or career changing... Read More

Utah Real Estate

Looking to buy real estate in Utah? The market has changed over the past few... Read More

Property Investment Strategy: Securing Properties with Little or No Deposit

Property Investing often requires creative strategies to make it successful. Professional property investors often use... Read More

Investment Real Estate -- A New Twist: Be the Bank, Not the Landlord, and Get Rich Without the Work!

I was a landlord for a decade, and I believe I probably lost a year... Read More

Homes in Chapel Hill

Chapel Hill is located right in the middle of North Carolina, halfway between the Blue... Read More

For Sale in Ridgefield

Ridgefield Connecticut, located near the New York border, is a small, quiet town, and a... Read More

Basic Real Estate Valuation

Given the current interest (dare I say hysteria) associated with investing in dirt and buildings,... Read More

Buying a Vacation Home

You'd like to buy a vacation home, but you're not sure where to begin. Perhaps... Read More

How To Find An Experienced Monticello Illinois Realtor

Finding a professional Monticello Realtor in Illinois is the best way to find the perfect... Read More

Home Staging: How to Make Your Tract Home Stand Out in the Crowd

Home sellers who wish to market their property in development neighborhoods face tough challenges. All... Read More

Understanding the Escrow (Closing) Process

1. What is an escrow?Escrow is defined as a process where parties deposit instructions and... Read More

Vegas: The New Frontier

Unless you have been living in Siberia, you know that Real Estate is on fire... Read More

Real Estate Investing - Makeovers vs. Flipping

Please don't call it "flipping."Some real estate investors who practice the technique of buying property... Read More

Building Your Dream Home - Part 1

For most of my adult life I had thought about someday building my Dream Home.... Read More

10 Tips to Sell Your House Faster!

Here are some Handy wee Tips to help you Sell Your House Faster. These are... Read More

10 Frequently Asked Short Sale Questions

1. What happens to the seller's credit rating when they allow an investor to short... Read More

U.S. Real Estate Sought By Foreign Investors Due to a Weaker Dollar

The weak US dollar has been good news for real estate. Taking advantage of the... Read More

Property in Bulgaria - Huge Investment Potential

Bulgaria is a truly magnificent country, located in Eastern Europe with an amazing coastline that... Read More

Rapid City Real Estate Agents

Take me Back to the Black HillsLocated in Western South Dakota, Rapid City is a... Read More

Property Investing

Wrapping a property is a simple concept that can create passive income for you and... Read More

Real Estate Investing Requires Education

I really believe in getting an education in real estate investing, especially before launching a... Read More

Why Real Estate?

Five months ago I was faced with a decision to keep doing the same thing... Read More

What is Tax-Deferred Exchange?

Under Section 1031 of the Internal Revenue Code, owners of real estate held for investment... Read More

Internet Battleground for Future of Residential Real Estate

Real estate agents are gearing up to face the biggest shift in their industry since... Read More

The Bubble Effect

Turn on the TV at almost any time day or night and you will find... Read More

A $100,000+ Discount On Miami Condos

By this point and time, many people have heard about buying preconstruction condos and some... Read More

Negotiating the Real Estate Contract

Negotiation is the process of communication back and forth in order to reach a joint... Read More

Timing Clauses Stop Sellers From Inciting Bidding War

It is no secret that the current real estate market is hot, hot, hot. Sellers... Read More

Tax Assessment/Appraisal: How Do I Know What My Home is Worth?

If you are in the home buying or selling market, it's important to understand the... Read More

Real Estate: Financial Considerations $$$

Raw land as opposed to improved property is much more difficult to finance through traditional... Read More

How to Get the Best Price for Your House

The best price to sell your home is always determined by how you compare against... Read More

Ten Tips For Selling Your House

One of the biggest mistakes people make when selling a house, is not understanding real... Read More

Investing in Real Estate for Your Retirement (and Now!)

You've probably heard a lot of opposing information about Investing in Real Estate, which is... Read More

Do You Speak Real Estate?

Anyone interested in real estate should be able to talk the talk. Here is a... Read More

Tax Free Exchanges: Watch out for the New Residence Rules

On October 22, 2004, President Bush signed tax legislation that contained a provision affecting Internal... Read More

What to Look Out For When Buying Off Plan

Buying Off PlanIt can be difficult to decide when every deal seems to be not... Read More

How Real Estate Investors Use Mortgage Note To Purchase Properties

Many of you may not be aware of the various ways notes can be used.... Read More

Where Does Your Real Estate Commission Fee Go - Why is The Commission so HIGH?

Many who have bought and sold properties through Realtors numerous times; even many real estate... Read More

Foreclosure Home Deals

Did you know that you can save tens of thousands of dollars on the purchase... Read More

Good Faith Deposit ? Real Estate Transactions

In a real estate transaction, a touchy issue is how much trust the seller has... Read More

Regarding Real Estate On Leased Land

1.Why are there so many properties on leased land?There are several situations here. Business and... Read More

Four Reasons To Offer Seller Financing

An example of seller financing: Years ago I bought a rental property, and nine months... Read More

Dont Overpay for a House, Even in Todays Market

If there's one thing American investors love, it's an over-inflated market. Which is why they... Read More

How To Increase Your Homes Selling Price by $3,306.75 In The Next 33 Days

According to the Federal Housing Finance Board:... "As of October 2004, The U.S. national average... Read More

Buying a Newly-Built Home? Ten Benefits of Using a Real Estate Professional

It might not seem necessary to involve a real estate professional in a transaction where... Read More