2 Key Questions To Ask Before Hiring A Business Appraiser
Note: This article applies to market appraisals only. If you are unfamiliar with the difference between market and compliance appraisals, please read this first.
When it comes to business appraisals, most people don’t know what they don’t know. That is, they really don’t know what questions to ask. This site was created, not just to answer questions about business appraisals, but to help business owners, and their advisers, ask the right questions.
So, when you want to hire a business appraiser to perform a market appraisal, make sure you ask these 2 key questions:
1) Will you use private company market data to appraise the business?
Beware the answer of “I consider the market approach”, because many business appraisers “consider” but never (or rarely) actually use the market approach in coming to their conclusion of value. Also, make sure they are using private company market data, and not public company market data. Strange as it may sound, many appraisers use public company data (e.g. stock market data) to value private companies. Can you imagine using Wal-Mart to value the corner general store? Or Google to value a small online business? Unfortunately, this happens all too often.
2) How many appraisals have you performed?
Beware when someone wants to quote the number of years of experience they have. Most CPA’s that perform business appraisals only do one or two a year. So the CPA who boasts 15 years of business appraisal experience may have actually performed only 20 or 30 business appraisals. Experience counts. Make sure you hire a business appraiser with at least 100 appraisals under his or her belt.
If you want a reliable business appraisal, choose an appraiser with strong experience using private company market data.