Paul Vogt


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At some point during the lifecycle of your business, you will no doubt determine that you need to know the value of your business.

You may desire a valuation for business planning purposes, or you may require a valuation for IRS or regulatory reasons. No matter what the reason for the valuation, knowing how to select the right valuation professional for your particular needs, and what to expect during the valuation process will lead you to a successful outcome.

Selecting Your Business Valuation Professional

Understanding the qualifications of your valuation professional will prove to be invaluable. While knowledge of finance, business and tax laws are essential, industry knowledge and sound judgement are equally important. Each of these qualities can be gauged by reviewing the business appraiser’s credentials, track-record and references.

As you begin to research the qualifications of business appraisers keep in mind that although no certification or licenses are required to perform valuations, reviewing the credentials of the professional will certainly give an indication of their expertise. With so many different valuation designations from different organization existing, it can be difficult to know which ones to trust. Among all of the credentials available, individuals holding the Accredited Senior Appraiser (ASA) designation, offered through The American Society of Appraisers, go through the most stringent application and examination process. You’ll know you are on the right track if your business valuation professional holds an ASA designation which can easily be verified at

Next, review the valuation appraiser’s track-record. Has the appraiser been successful in dealing with valuations that have been challenged? It is not uncommon for the Internal Revenue Service (IRS) to scrutinize certain financial information used to value a business. Ask the valuation professional about their success rate in dealing with the IRS. A competent expert will arrive at a proper value and be able to justify and overcome
IRS challenges.

Finally, check the references of valuation professionals. A reputable valuation expert will have relationships with numerous professional service providers such as attorneys, accountants, and wealth advisors. Your valuation professional should be able to provide you with a number of solid references which demonstrate his or her skill level, judgement and industry expertise.

If the valuation expert passes each of the above tests, you should feel confident that you have selected a professional who will take the time to develop a clear understanding of your company and the marketplace to derive a reasonable value.

Scope of Valuation Engagement

The valuation process starts with a conversation with the business valuation professional. During this discussion the valuation appraiser will ascertain the reason for the valuation and the nature of your business, as well as the percentage and type of interest to be valued. This conversation typically takes no more than 15-30 minutes.

Once the facts are gathered about the proposed engagement, the valuation professional will create an engagement letter which outlines the terms and objectives of the valuation, including the reason for the valuation, the valuation date, the cost and time frame. After you have read the engagement letter to ensure all of the facts are correct, you can sign and return the letter to initiate the engagement.

Documents Request

Your main responsibility during the valuation process is to provide the valuation professional information about your business. At the beginning of the engagement, the valuation company will provide you a request for documents. The list will include items such as financial statements for the last several years, business plans and forecasts, articles of incorporation, operating agreements, various schedules, contracts, etc. Providing accurate documents in a timely fashion will generally ensure your valuation report is completed quickly and accurately.


The valuation company will want to do a site-visit. This visit includes a tour of your facilities, as well as a sit-down meeting involving the valuation professional and members of the management team. By this time, the valuation professional has reviewed historical financial statements and other relevant documents so that he or she can discuss items like the profitability of the company and the condition of the balance sheet, and any
other relevant facts. The condition of the business, factors that drive value, various milestones achieved over the business lifecycle, and goals and forecasts will be of particular interest to the interviewer.

Research and Analysis

Equipped with information, the valuation professional will begin the process of valuing the company. The process includes valuation modeling, a process of constructing mathematical models, generally in spreadsheets, that seek to accurately reflect the historical and forecasted operations of the company.
The models used might range from the very simple to the very complex, depending on the nature of the company. The models used will ultimately be based on one or more of three overall valuation approaches.

Report Delivery

Upon a complete analysis of your business and industry, and a reconciliation of the valuation approaches, a value will be determined. This is usually an iterative process as the valuation will go through several rounds of peer review among the valuation team to form a solid rationale for the valuation. Once the value is determined, a thorough report will be provided to you in a draft version. You will be given the opportunity to review the report and provide feedback, as needed. Once the draft version has been approved, you will receive a signed copy of the final report.

This is a highly simplified version of the valuation process, but gives you an idea of what to expect.

Largest Transactions Closed

  • Target
  • Buyer
  • Value($mm)

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