How do you choose the right expert to appraise a business ?Jean-Claude Desnoyers
Would you ask a dentist to perform a heart surgery? Probably not! Same reason you should make sure to choose the right expert for a business valuation. Business valuation is not rocket science, but you have to know how to do it. It is especially important to keep up to date and practice regularly. Like anything, practice helps you get better. To make sure you are dealing with the right specialist, here are 6 things to check and consider before giving a mandate in business valuation to a professional.
1. Is it necessary to have specific training?
By choosing a professional who has specialized and extensive training in business valuation, you can expect a fair and just opinion and business’ value. You should check what training he/she received in business valuation prior to entrusting the mandate. The Canadian Institute of Chartered Business Valuators (CICBV) offers a recognized study program in the field of business valuation. This program includes six courses and requires 1,500 hours of business valuation work or related tasks. Also, the expert must pass the CICBV final exam to verify the integration of all acquired knowledge. All these prerequisites lead to the title of Chartered Business Valuator (CBV).
2. Is the experience important?
Like any other field, the more experience you have, the better you will be. It’s the same thing in business valuation: experience ensures reliability of opinions and results. This is the reason why the CICBV requires 1,500 hours of practice before getting the title of CBV. Practice is the basis of experience, efficiency and reliable judgment. If the expert has completed a high number of valuation mandates and gets mandates on a regular basis, you can be sure that he knows what he’s doing and that he’s keeping himself up to date with valuation standards. You should always ask the expert how many reports he has prepared and signed. The higher the number, the better the odds of having a reasonable value.
3. Is the professional title required?
For a business valuation mandate, it is recommended to deal with an expert, holding the title of Chartered Business Valuator (CBV). The title confirms that the professional has specialized training, experience and that he/she has completed the required 1,500 hours of practice. Also, the title ensures that the expert applies the CICBV’s standards, recognized as the industry standards in Canada. It’s a confirmation that he respects the Institute’s code of ethics. Several regulatory agencies recognize the CICBV standards as the industry standards in Canada. Although the title is not mandatory to do a business valuation, a report prepared and signed by a CBV ensures a certain level of quality and increases the probability of reasonable and justified conclusions.
4. Does an expert have any recognition?
The title of Chartered Business Valuator (CBV) is granted to a business valuation professional and delivered by the CICBV. The Institute is recognized nationally. It joined the International Valuation Standards Council (IVSC), almost 10 years ago, to take a role in maintaining global standards. Also, the CBV is recognized in Court and may provide expert testimony in financial disputes.
5. Will I win with an expert on my side?
Whether he is hired by one or both of the parties, the expert is not there to help you win, but to offer his/her neutral and objective expertise. It is mandatory that he/she acts as an independent expert to provide defensible and fair conclusions. Dealing with an expert will provide you with the fair market value of the business in any situation, such as litigation, acquisition/sale of a business or tax planning,
6. What can an expert do for me?
The CBV can help you with several tasks in an objective and neutral way. He/She can:
- Produce a valuation report;
- Provide a verbal second opinion on valuation reports or letter produced by another expert;
- Advise you in the purchase or sale of a business;
- Provide a critique or comments on a report from another expert;
- Help you understand complex organizational structures;
- Advise you in the preparation for the interrogation or examination of a witness or an expert;
- Provide testimony as an expert witness in Court;
- Advise you in the preparation for a settlement conference or for the negotiation of an agreement;