Having made the decision that a business valuation is required, the next step is to determine who should be contracted to execute the valuation. From a logical standpoint, one would think that a CPA, banker, or financial advisor might be a prime candidate for the job. After all, these are highly knowledgeable professionals with a background in business and finance. In fact, there may already be such a respected professional with an established working knowledge of the situation at hand, available to step in and provide the valuation. However, unless the person under consideration is certified in business valuations, this could be as big of a mistake as not obtaining a valuation at all.
While such financial professionals may have the experience and knowledge to be able to determine a specific value for a business, such values obtained from non-accredited professionals are not considered sufficient evidence thereof. In such instances, it is easy for the opposing party to show that neither the expert nor valuation are credible, think Daubert challenge. Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579 (1993). On a side note, it is important to point out that a CPA who is also an accredited business valuator and who is conducting a valuation of a business for which they perform other professional CPA services may be in violation of the AICPA Professional Standards for conflict of interest and independence.
All accredited business valuators are required to attend a minimum number of hours of Continuing Professional Education (CPE) classes to maintain their valuation credentials. Each accrediting organization has its requirements. You can check if valuator’s credentials are valid with a phone call to the organization.
There are currently four organizations that offer various professional accreditations in business valuation:
Issuing Organization & Designations
National Association of Certified Valuators and Analysts (NACVA)
CVA – Certified Valuation Analyst
American Institute of Certified Public Accountants (AICPA)
ABV – Accredited in Business Valuation
American Society of Appraisers (ASA)
ASA – Accredited Senior Appraiser
FASA – Fellow of American Society of Appraisers
Institute of Business Appraisers
CBA – Certified Business Appraiser
MCBA – Master Certified Business Appraiser
All four organizations require that each applicant:
- Have an appropriate college degree.
- Attend rigorous training classes.
- Pass an extensive knowledge exam.
- Comply with the respective organization’s published business valuation standards.
- Attend continuing professional education courses in current business valuation topics to maintain the particular credentials.
As you can see, hiring a certified, accredited valuator gives the best opportunity for a successful outcome.