Business valuation in 9 easy steps

A business valuation may seem complex, but with a Chartered Business Valuator (CBV) who has experience and specialized training, the task is much simpler. The right expert will provide you with an objective and defensible fair market value (FMV) of the company. This assessment will help you achieve your goals. Follow these 9 easy steps to get the results you are expecting. With an expert on your side, you will have the right input on the business’ value.

1. Confirmation of need

Following a call or an email from a client or a professional, it is important to confirm the need for the business valuation. A discussion to understand the motivations to use this service is required. This conversation allows the CBV to get to know more about the company and the circumstances justifying the request for service. It is important to determine whether or not a valuation of the business is really required.

2. Proposal for appropriate services

After confirming the need, it is essential to offer the right type of valuation report that will address the requirement and to determine the most appropriate valuation date. To provide the most adequate service, the purpose of the valuation (litigation, sale, purchase, etc.) has to be considered. The different services and types of valuation reports can be explained to the client, providing the information on the terms; fees, date and valuation standards and the involvement of different professionals, if needed. This proposal is made over the phone, directly with the CBV.

3. Confirmation of mandate

When the client and the Chartered Business Valuator agree on the need and type of valuation, the process begins. The documents needed for the confirmation of the mandate are sent by the customer. A preliminary estimate is provided and can be modified according to the documentation received by the expert.

4.  Transmission of documentation

On the reception of the financial statements, the estimate is finalized. An engagement letter, stating the requested mandate, is sent to the client. This letter is considered as an agreement. Upon execution of the mandate, the client agrees to pay and cooperate during the process. The process begins with the financial statement for the last five years, the signed engagement letter and the deposit.

5. Questionnaire

Reading financial statements is not sufficient to conduct a comprehensive and undeniable valuation. A questionnaire is sent to the customer, to learn more about the company, its business model, income and expenses, risks, competitive advantages, assets and liabilities. The sooner the answers are received and the more complete they are, the quicker the valuation can be provided and the more accurate it will be. Depending on the client’s preference or to avoid missing information, it is possible to fill the questionnaire over the phone with the Chartered Business Valuator (CBV).

6. Preliminary research

To properly evaluate the business, it is important to be familiar with the industry. The Chartered Business Valuator goes well beyond the financial statements. He reviews cash flow, operations, economy, industry, business model, business management and many other aspects. The research provides a better understanding of the situation to deliver an accurate assessment. Depending on the mandate, a visit of the company’s facilities may be required.

7. Valuation report

To conduct the assessment, the valuator must choose the most appropriate method for the mandate. Although there are several techniques or methods to determine the fair market value (FMV), none is infallible. On the other hand, a Chartered Business Valuator, with his training and experience can offer you a fair and defensible valuation. The sections and the amount of information provided in the report will vary according to the type of report requested, the scope of the review and the analysis. The fair market value of the business is determined based on the company’s performance and financial structure.

8. Report’s submission and explanations

At completion, the report is submitted to the client and explained if necessary. According to the mandate and the situation, other parties can be inform of the report’s conclusions. If explanations are needed, the Chartered Business Valuator can also take time with the other parties involved in the case. Be aware that the client file and information will remain confidential and will never be discussed with anyone without the prior consent of the client.

9. End of mandate

The final invoice is sent to the client once the valuation is complete. The payment allows the mandate’s closure. The report and the documents received for the valuation are kept in a confidential manner, for reference or future mandates.