Types of Business Appraisers: Which Professionals Can Perform a Business Valuation?

For small-to-medium-sized business owners, understanding the value of your business is crucial in a number of scenarios, including tax, sale, merger, litigation, or strategic planning. Business valuation is a complex process that requires a deep understanding of both qualitative and quantitative factors. Several types of appraisers perform business valuation- but what are the differences? And most importantly, which professional is the best for your business? This article will guide you through the different types of professionals who are qualified to perform business valuations to help you make an informed decision for your business.

Key Takeaways:

Types of professionals who can assess business value:

• Business Brokers
• CPA with ABV- Certified Public Accountant Accredited in Business Valuation
• CFA- Certified Financial Analyst
• CVA Certified Valuation Analyst
• ASA- Accredited Senior Appraiser
• In this article, AVGI will explore the credentialing requirements for each type of professional and the pros and cons of using each one to perform a business valuation.

Business Brokers

Fast Facts:

Title: None

 Credentialing Organization: None

 Credentialing Requirements: None

While not always holding formal valuation credentials, experienced business brokers often have practical knowledge in valuing businesses within certain industries, especially when it comes to preparing a business for sale.  Business brokers have experience in informally assessing business value, which can help ensure an accurate valuation. They may be able to provide a quicker turnaround time than a business appraiser.

Consider some of the downsides of using a business broker: Business brokers may have a conflict of interest if they are also representing a buyer or seller in the transaction. They may not have the same level of expertise and training as a certified business appraiser.

A business broker or M&A advisor can issue a Brokers Opinion of Value (BOV) as the first step in assessing the business value in preparation for selling a business. The BOV takes into account many factors about the business to issue the opinion, but they are rough estimates with little or no adjustments for the level of value. As such, it’s important to understand that a BOV is not a valuation or appraisal and is not bound by any credentialing body’s business valuation standards for those assessment levels. The takeaway: Your business worth could be much more or less than stated in a BOV.

Certified Public Accountant (CPA) with an ABV (Accredited in Business Valuation)

Fast Facts:

Title: Accredited in Business Valuation (ABV)

Credentialing Organization: The American Institute of Certified Public Accountants

Credentialing Requirements:

1. Holding a CPA license
2. Presenting at least six business valuation engagements or 150 hours of substantial valuation experience
3. Passing a proctored one-day exam

CPAs who hold an ABV have some training in business valuation, as the accounting field does overlap somewhat with valuation. ABV certification is awarded by the AICPA to CPAs who present six business valuation engagements or 150 hours of business valuation experience and pass a proctored exam.

CPAs can perform a business valuation but are not experts in the field. Therefore, many CPAs offer valuation as a side service during their slow seasons. The advantage of using a CPA for a business valuation is that it is less costly and may return faster results than a report from another professional.  However, not all accountants have the same level of training and expertise in business valuation, so they may not be able to provide as independent and unbiased a valuation as a certified business appraiser.

Therefore, a CPA business valuation may suffice for a small business with a simple business structure, depending on the valuation purpose.

If the stakes are high and precision is paramount, such as in business litigation, IRS tax audits, and preparing a business for sale, it may be better to opt for more specialized business appraisers to determine business worth.

Chartered Financial Analysts (CFAs)

Fast Facts:

Title: Chartered Financial Analysts (CFA)

Credentialing Organization: CFA Institute (formerly AIMR)

Credentialing Requirements:

1. Pass three difficult exams
2. Hold a bachelor’s degree
3. Have at least 4,000 hours of relevant professional experience over a minimum of 3 years.

CFAs specialize in investment management and operational and financial performance analysis. Although this is not their direct area of expertise, they often need to analyze business value as part of their work. Those who focus on valuation might work in corporate finance, equity research, or investment banking. Their rigorous training means that they are familiar with the terminology and theory of business valuation, but they may not have much practical experience in performing valuations. 

Accredited Senior Appraisers (ASAs)

Fast Facts:

 Title: Accredited Senior Appraiser (ASA)

 Credentialing Organization: The American Society of Appraisers

 Credentialing Requirements:

1. At least five years of full-time experience in business valuation
2. Completion of ASA’s four-level course series
3. Passing the corresponding written and oral exams
4. Interview with a local chapter
5. Passing ethics and USPAP exam
6. Presenting two appraisal reports for peer review
7. Completion of continuing education courses

ASAs are designated by the American Society of Appraisers. They have experience in valuing businesses, securities, and intangible assets and are required to complete extensive training and ongoing education in valuation principles, ethics, and techniques. Qualified business appraisers determine company value using empirical methods and present their findings in a report. These defensible business valuation reports can be used as evidence in case of an IRS tax audit or a court of law. However, appraisers can be expensive; business valuation costs can range from a few thousand dollars to tens of thousands of dollars, depending on the scope and complexity of the work. A valuation report from a business appraiser can take several weeks or even months.

Specialized Valuation Firms

A professional appraisal practice focuses exclusively on valuation services and typically employs professionals with various credentials. They offer a depth of expertise and resources for comprehensive valuations, especially for complex or larger businesses.

Choosing the right professional for your business valuation depends on the valuation’s purpose and the scope and accuracy needed. Selecting an individual or firm with the appropriate credentials and valuation experience is important.

Remember, a thorough business valuation provides not just a number but a deeper insight into your business’s worth, helping you make informed decisions about its future. When selecting a professional, ensure they adhere to the standards set by regulatory bodies such as the American Institute of CPAs (AICPA) and the International Valuation Standards Council (IVSC).

In Conclusion: Which Type of Business Appraiser Should Perform Your Valuation?

Business valuations are a critical tool for any business owner. By engaging with the right professionals, you can gain a clear and accurate understanding of your business’s value, positioning yourself for strategic decision-making and success.

Determining the fair market value of your business is a complex process that requires specialized expertise and training. While business appraisers are the most specialized and independent option, they may not be the best fit for every situation. Business brokers, accountants, and business owners can all provide value in certain situations, but it’s important to understand the pros and cons of each option and choose the best fit for your specific needs.

If you’re looking for a team of multidisciplinary business valuation professionals of the highest caliber with extensive valuation experience, Abrams Valuation Group, Inc. (AVGI) can help. Our team, led by Jay B. Abrams, CPA, ASA, MBA, has a proven track record of providing accurate and reliable business valuations for various purposes. Contact us today to learn more.