Insights from a valuation expert on how to prepare and what to know
by Dan Doran
Tuesday, December 8, 2015

CBO: What are your top three general tips for choosing a business appraisal firm?

  1. First, confirm that the business valuation firm has experience with businesses and situations similar to your requirements.
  2. Be clear with the firm about your expectation for project completion. Be sure to understand what the firm will require in order to complete the valuation report in a timely manner.
  3. Look for credentials. Is the analyst/firm properly credentialed? This is very important in litigation matters or SBA loans (for example, where certain credentials are required in order for the valuation to be accepted by the SBA).

CBO: Are there any common issues that lead to a lower perceived value or appraisal?

DD: The most common issues we see that lead to a lower valuation include, in no particular order: financial records in disarray, an over-dependence on a working shareholder and revenue concentration into a single (or very few) customer(s). These are the areas where businesses typically need to focus on either cleaning up their books or adjusting their revenue streams if they want to increase value.

CBO: Should employees be involved in this process? If so, which ones?

DD: Involving employees is a trade-off. When preparing for a sale, owners are often very concerned about confidentiality, but involving critical employees is actually a great exercise. At some point a buyer will want to meet and interview key staff members. "Reading them in" and exposing them early to the process can reduce/mitigate surprises when it comes time to meet the buyer. In nonsale situations, there’s nothing to lose by involving employees, such as a CFO, COO or vice president of sales.

CBO: What kind of timeframe should a business owner expect/plan for?

DD: If the business is working with an appraisal/valuation firm to prepare for an exit, ideally the business owner should begin the planning process three to five years in advance. This gives plenty of opportunity to address any problems, increase "salability" and ultimately improve valuation. The actual time frame to complete a valuation varies greatly from firm to firm. It could range anywhere from a few weeks to a few months. It is critical to confirm availability and estimated completion dates if you have any hard dates that you need to hit.

Don't miss an in-depth article from Doran in our January 2016 issue of Construction Business Owner on how to choose a business appraisal firm and what to consider when preparing for a valuation. 


Dan Doran is principal of Quantive Business Valuations, a professional business valuation practice specializing in small to mid-size, closely held and family-owned businesses. Doran holds the CVA credential, has performed hundreds of valuations and advised on a wide variety of M&A transactions as a partner with Clear Rock M&A. Visit Quantive Business Valuations.