A business appraisal can help you know the value of your company, which is valuable information when reselling your company or considering mergers. But, you need professional business appraisers to perform the business appraisal for accurate information. However, finding the right appraiser may not be easy. When you find a prospective business appraiser, here are the questions to ask to ascertain that they are the right choice for you.
What Approaches Will You Use?
The common business appraisal methods are:
Income Approach. This approach values a business based on the future income you expect your company to make. There are two methods in this category:
Capitalization of Cash Flow. Appraisers use this method on companies that have stable income margin growth in the future.
Discounted Cash Flow Method. This approach is more flexible as appraisers allow for margin variations since factors such as growth rate may change in the future.
While these two approaches are practical, appraisers will choose an income approach method that works for your company.
Market approach. This valuation method determines the value of a business by comparing the price of other similar companies sold recently. Appraisers usually study price indicators such as sales and book values during value assessment.
Asset Approach. This business appraisal approach determines a company's value by focusing on the market value of a company's assets after deducting liabilities.
Business appraisers should understand the various valuation approaches and choose the ideal method to appraise your business accurately.
How Will Your Appraisal Services Benefit a Business?
Hiring a business appraiser costs money, and you should know the benefits you stand to gain from an appraiser's services. Typically, appraisers recommend that you conduct business appraisals annually. The common benefits of business appraisals include:
Estate planning. A business valuation helps you know your business, which helps determine the amount your heirs will inherit during estate execution.
Accountability. Knowing the value of your business helps you know whether your business is on the right track. This helps make better management decisions for improved performance.
These benefits make hiring business appraisers worthwhile.
How Much Will You Charge for the Appraisal?
You need to know the charges of your prospective business appraiser to budget accordingly. You should compare the rates with other business valuation appraisers to get the most affordable business valuation service. This will help you stay within your budget limit.
When searching for business appraisers, ask questions about the cost of their services, the business valuation methods they use, and the benefits of their appraisal services to your company. Consider hiring a business valuation appraiser that answers these questions accordingly.