How to choose a business valuator
You may need to hire a business valuator for any number of reasons. You might want an objective opinion on the fair price for an acquisition or sale of a business, or for tax planning or succession purposes. Or a bank may ask you to get an outside valuation to finance a business transfer.
But valuation isn’t an exact science. Different valuators may arrive at differing values for a company based on their approach and assumptions. Here are some tips on how to choose a business valuator.
1. Seek experience and reputation
Ask your accountant, lawyer and others in your network to recommend valuators they have worked with. It’s helpful to seek valuators who have experience with your industry and with whom you have a good fit. You’ll likely be spending a lot of time with this person and have to be able to trust them with sensitive business information.
It can be a good idea to choose someone who holds the Chartered Business Valuation certification. These experts have completed a curriculum of courses on business valuation as well as passed an exam administered by the Canadian Institute of Charted Business Valuators.
2. Consult transaction partners
It’s a good idea to consult your partners on the choice of a valuator. For example, if the valuation was requested by a bank, they may be more likely to give credence to a report from an established, credible firm. The bank may even have a list of preferred valuators they ask clients to use.
If you’re hiring a valuator as part of a business transfer, it can be useful to choose one who both parties agree on. This can help you avoid disagreements about the valuation or the risk of duelling valuations.
3. Consider whether a valuator is needed
Business transitions often don’t require the services of a valuator. Banks usually do their own valuation when asked to finance an acquisition and don’t typically require an outside valuation.
For smaller businesses or a sale to family members, an accountant experienced with business valuation may be able to give you an adequate sense of a company’s worth.
That said, a valuator may be helpful if parties to a transaction can’t agree on a fair price. A bank may request a valuation if a company’s future earnings or cash flow are expected to change substantially or if it has doubts about information on the company.
If you do choose to work with a valuator, the fee will tend to vary according to the size and complexity of the business being valued.