Who Does Business Valuations? A Comprehensive Guide to Valuation Experts

Latest Facts and News 

• The global business valuation services market is expected to see a growth of 5.64% and may reach a market size of USD 20.4 billion by 2030, currently valued at USD 15.4 billion.
• AI and machine learning are increasingly being used in business valuation processes.
• Recent changes in accounting standards have impacted business valuation methods.
• The COVID-19 pandemic has led to a surge in business valuations due to economic uncertainties.

When selling a business, preparing for a merger, or addressing legal and financial matters, determining the value of your business is essential. Business valuations help ensure fair dealings, accurate reporting, and sound financial planning.

Now, you might be wondering, “Who does business valuations?” These assessments are carried out by professionals who apply specialized knowledge, market research, and financial data to provide reliable evaluations. Their work ensures that every aspect of your business’s worth is thoroughly analyzed and correctly presented.

In this guide, we’ll explore what makes these experts qualified, the methods they use, and how their role impacts major business decisions.

Understanding Business Valuation Professionals

A business valuation professional (simply someone who does business valuations) is a qualified expert trained to assess and determine the monetary worth of a business or its assets. 

These individuals use established financial principles, market data, and valuation methodologies to provide an objective evaluation. Their expertise ensures that the valuation is accurate, credible, and suited for various purposes, such as mergers, acquisitions, financial planning, or legal disputes.

Responsibilities of a Business Valuation Specialist

Business valuation specialists play a critical role in determining the worth of a business or its assets.

Here are their key responsibilities:

1. Legal Financial Assessments: Valuation specialists provide detailed financial evaluations for lawsuits and legal disputes.
2. Transfer Pricing Support: They analyze transactions between related entities to ensure compliance with regulations and fair pricing.
3. Retirement and Exit Strategies: These specialists help business owners plan for retirement or exit the business with accurate financial recommendations.
4. Succession and Estate Planning: They prepare valuations for succession planning and provide insights for estate tax filings.
5. Mergers and Acquisitions Valuations: Business valuation specialists determine the value of companies during mergers, acquisitions, or sales.
6. Recapitalization Analysis: They assess and recommend changes to a company’s financial structure to improve its financial health.
7. Future Earnings Projections: They estimate future profits to support investment decisions and strategic planning.
8. Risk Assessment: They evaluate potential risks that could impact the business’s value or operations.
9. Asset Valuation: Business valuation professionals estimate the value of tangible and intangible assets, including intellectual property.
10. Detailed Valuation Reports: These specialists compile their findings into clear and accurate reports tailored to the client’s needs.

Choosing someone who does business valuations is just what you need for an accurate valuation. However, we need to go even deeper and walk through the qualifications and certifications in detail. 

Qualifications and Certifications

Becoming a qualified individual who does business valuations requires a set of training, certifications, and adherence to standards set by accredited organizations. 

Let’s look at some of the most recognized qualifications and certifications in the field:

Choosing a certified professional who does business valuations ensures your business valuation is accurate, compliant, and customized to your needs.

Bonus: California Tax Planning Services 

Types of Business Valuation Experts

Professionals who does business valuations bring unique skills and credentials to the process. Each type of expert offers specialized knowledge tailored to specific needs, making them essential for different aspects of business valuation.

1. Certified Valuation Analysts (CVAs)

Certified by the National Association of Certified Valuators and Analysts (NACVA), CVAs complete rigorous training and exams. They work on valuations for businesses of all sizes, offering reliable results.

2. Chartered Financial Analysts (CFAs)

CFAs, certified by the CFA Institute, are experts in financial analysis and investment management. They often handle valuations for mergers, acquisitions, and investment opportunities.

3. Certified Public Accountants (CPAs)

CPAs are licensed professionals with deep knowledge of accounting and finance. They focus on valuations that involve detailed financial analysis, especially with tax considerations.

4. Accredited in Business Valuation (ABV)

ABV is a credential from the American Institute of CPAs (AICPA) for CPAs specializing in valuations. It requires advanced training and exams, ensuring ABVs can manage complex cases.

5. Business Appraisers (ASA)

Accredited by the American Society of Appraisers (ASA), these professionals specialize in valuing businesses and assets. Their certification involves extensive education and peer-reviewed evaluations.

Top Business Valuation Firms

If you’re looking for the best business valuation firm in Brea, CA, or anywhere nationwide, Focus CPA is the name you can trust. We’ve been helping businesses like yours for over 20 years, and here’s why so many people choose us:

• We’re certified experts with CVA credentials, so you know your valuation is in the best hands.
• We’ve worked with businesses in industries like construction, medical, automotive, entertainment, and manufacturing, giving us a proven track record you can count on.
• We use a variety of valuation methods—income, market, and asset approaches—to make sure we’re capturing your business’s true worth.
• We understand that every business is unique, and we’re experienced in handling even the most complex structures.

There are plenty of firms out there offering business valuation services, but what makes Focus CPA different is our personalized approach. We take the time to understand your unique needs and deliver a strategy that works specifically for you.

While Focus CPA remains a trusted choice for many businesses, there are other firms in the market too. Here’s a quick look at some of them:

Each of these firms, who does business valuations, excels in specific areas of valuation. Choosing the right firm depends on some factors that we are discussing in the below section.

Advantages of Specialized Boutique Firms for Business Valuations

Boutique firms who does business valuations are known for offering more personalized and client-focused services compared to larger corporate firms. At Focus CPA, we take the time to understand your specific needs and provide tailored valuation services that are just right for your business. Here’s what sets us apart:

• Personalized Attention: We focus on what’s important to you, ensuring that each valuation reflects your business’s unique needs.
• Industry Expertise: We have deep knowledge of different industries, allowing us to provide relevant and valuable insights for your sector.
• Clear, Detailed Reports: Our valuation reports are straightforward to understand, helping you make the best decisions for your business.
• Quick Turnaround: Our small, efficient team works fast to provide the results you need, even under tight deadlines.
• Affordable Pricing: We offer quality services at prices that won’t break the bank, making sure you get the best value.
• Flexibility: We adjust our approach to fit your business, providing the support you need, whether you’re a small start-up or a larger enterprise.

When to Hire a Business Valuation Expert?

Knowing when to hire someone who does business valuations is important for making informed financial decisions and protecting your business interests. Here are common scenarios where professional valuation services are necessary or beneficial:

1. Transferring Assets Between Subsidiaries

If your business involves intercompany transactions, such as goods or services exchanged between subsidiaries, a valuation ensures compliance with IRS guidelines and helps maximize efficiency.

2. Preparing for Property Tax Assessments

When facing property tax obligations, a valuation of your tangible or intangible assets ensures you pay only what’s fair, avoiding overpayment.

3. Restructuring Your Business or Settling Divorces

During business restructuring or divorce settlements, accurate valuations help fairly allocate assets, reduce tax liabilities, and identify cost-saving opportunities.

4. Resolving Legal Disputes

In litigation involving business value, hiring a valuation expert strengthens your position in negotiations or court, ensuring defensible and fair market valuations.

5. Establishing Buy/Sell Agreements

For partnerships or LLCs, valuations help set fair market value for buy/sell agreements, preventing future conflicts when a partner exits the business.

6. Planning a Merger or Acquisition

When acquiring or merging with another company, valuations determine a fair purchase price and help avoid overpayment or misaligned expectations.

7. Selling Your Business

Whether you’re planning to sell your business or need to sell unexpectedly, valuations provide a clear picture of your company’s worth, allowing you to secure the best price.

8. Managing Employee Stock Ownership Plans (ESOPs)

ESOPs require annual valuations to meet IRS and ERISA standards. These valuations ensure fair stock prices for employees and compliance with regulations.

9. Securing Loans or Investments

Banks, venture capitalists, and investors require an objective valuation before committing funds. A professional valuation builds trust and facilitates funding.

If your business is experiencing any of these scenarios, consult Focus CPA, who does business valuations with maximum expertise and ensures accuracy, compliance, and financial confidence. 

The Business Valuation Process

Business valuation is a systematic process that provides an accurate estimate of a company’s worth. Below is a simple, step-by-step process to follow:

1. Hire a Business Valuation Expert: Start by finding a qualified professional with the right credentials and experience. Look for experts through trusted sources like professional associations or referrals from financial or legal advisors.
2. Initial Consultation and Agreement: Meet with the expert to discuss the purpose of the valuation, whether it’s for a sale, tax reporting, or another reason. Once details are clear, both parties sign an agreement that outlines the scope, timelines, and fees.
3. Define the Basis of Value: Determine the type of value being assessed, such as market value (what a buyer would pay) or investment value (what it’s worth to the current owner). This step sets the direction for the valuation.
4. Determine the Premise of Value: whether the valuation assumes the business will continue operating or if its assets will be sold. The decision depends on the purpose of the valuation.
5. Gather Relevant Data: Collect all necessary financial documents, contracts, leases, and agreements. The expert may also research data from similar companies for comparison.
6. Review Historical Performance: Analyze the company’s financial history, ownership structure, and past performance. This helps assess its current position in the market.
7. Project Future Performance: Estimate future revenues, expenses, and profitability. These projections are based on historical trends, current strategies, and market comparisons.
8. Choose the Valuation Method: Select the most suitable valuation approach, such as the market approach, income approach, or asset-based approach. Sometimes, multiple methods are combined for accuracy.
9. Incorporate Discounts: Apply necessary adjustments for factors like lack of marketability (difficulty selling ownership stakes) or minority interests (limited decision-making power).
10. Prepare the Final Report: Create a detailed report explaining the valuation process, methods used, and the final value estimate. This report is shared with stakeholders and includes a thorough explanation of the findings.

This process ensures that the valuation is accurate, transparent, and tailored to meet the specific needs of the business or its stakeholders.

Business Valuation Approaches

Business valuation involves three primary approaches: market-based, income-based, and asset-based. Each provides unique methods to determine a company’s worth.

Market-Based Approach

This approach values a business by comparing it to similar companies, often called “comps.” It uses the sale prices of comparable businesses to estimate market value. For instance, if a similar company sold for $6 billion, your business might hold similar value. Common methods include:

• Public Company Comparable: Compares with publicly traded companies.
• Precedent Transaction Analysis: Examines similar past transactions.

Income-Based Approach

This approach calculates value based on projected future cash flows. By estimating future income and converting it to today’s value, it provides an intrinsic value of the business. Common methods are:

• Discounted Cash Flow (DCF): Projects and discounts future cash flows.
• Capitalization of Earnings: Converts expected income into present value.

Asset-Based Approach

The asset-based approach calculates value by subtracting liabilities from the fair market value of assets. This is ideal for companies with significant investments, like real estate. Key methods include:

• Book Value: Based on balance sheet records.
• Liquidation Value: Values assets if sold quickly.

The right approach depends on the business and purpose of the valuation. Combining methods often gives the most accurate results.

Common Business Valuation Techniques Used by Professionals

Professionals who does business valuations use several established methods to determine a business’s worth. Here’s a comparison table summarizing these methods, followed by details about their calculations and applications:

Each valuation technique serves specific purposes and is best suited for certain business scenarios. Professionals who does business valuations often combine methods to achieve a comprehensive and accurate assessment.

Choosing the Right Valuation Professional

Selecting the right expert who does business valuations is essential for getting accurate results and making informed decisions. Here’s a simple checklist to guide you:

Do they have the right credentials? 

Certifications like CVA, ASA, or ABV show they’re qualified and experienced.

Do they specialize in your needs? 

Make sure they understand your industry or the specific reason for the valuation, like mergers, tax planning, or legal disputes.

What do past clients say? 

Ask for references or read testimonials to learn about their track record.

Are they clear and responsive? 

Good communication and timely updates are key to a smooth valuation process.

Is their pricing reasonable? 

Look for fair pricing, but focus on the value and quality they bring.

By asking these questions, you’ll find a valuation professional who’s the right fit for your business and goals.

Conclusion

We’ve explored who does business valuations and their critical role in assessing the financial worth of businesses. A comprehensive valuation provides not just a monetary figure but also insights into your business’s strengths, market potential, and areas for improvement.

These insights can help you make informed decisions, whether you’re preparing for a merger, planning for growth, or addressing financial challenges. Focus CPA ensures your business is evaluated with precision and expertise, helping you move forward with confidence. Get in touch today.