Over the years I have seen many appraisals from many different appraisers. I have been totally surprised by the wide variations of methods and the accuracy of these appraisals.
Appraising businesses accurately is not an easy task. There are about five different methods that can be used along with variations in the purpose of the appraisal. None of these methods addresses the total value of a business by its self. One method might look at cash flow value another at asset value and another at a capitalization rate. It is up to the appraiser to pick the appropriate method or give each of the methods used a percentage of the final value. Purpose also changes, as an appraisal done for the sale of a business will be different than one done for a divorce. Also, the IRS has certain requirements that must be followed for any appraisals submitted to them for such things as change in corporate structure or family trusts.
Financial statements and tax returns can create problems. Financial statements are always different, and tax returns don't always match the financial statements. I can spend hours going through the documents, talking to the business owner or the business accountant looking for answers. To do an accurate job on the appraisal I have to understand these documents completely and how they relate to each other.
There is a wide variance in the quality of business appraisals mostly because of lack of experience. It is easy to pick up an accounting book and find the different methods of doing an appraisal, picking out a formula and plugging in some numbers.
This process doesn't necessarily give you an accurate appraisal. Most accountants know this and turn to an experienced Business Appraiser for an appraisal. Also, be aware that there are appraisers that stuff the appraisal with irrelevant and highly technical information to exaggerate the complexity of the appraisal or over inflate the appraisal to make an owner feel he has a high value business.
With a growth in the internet, we now see fill in the blanks do it yourself business appraisals. It is not possible to get an accurate business appraisal this way. There is no way to provide a short cut to an accurate business appraisal.
I use a blended method of appraisal consisting of cash flow, asset value and market analysis. This blended method evaluates all items that create value in a business. I never have to guess if I am using the correct method or find percentages to use for each component.
I have successfully used this process for over 25 years for business sales and business appraisals.
About The Author: Bob Klein is President and Owner of Business Appraisals, providing California business owners and business buyers business appraisal services on all types of businesses. Bob Klein can be reached direct at 949-254-4062 regarding business valuations and appraisals.
|Helpful Resources To Assist In Selling And Buying California Businesses|
|Helen Yoo: Escrow & Bulk Sale Services - Southern California
New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.
|Janet Carrera - Escrow & Bulk Sale Services - SF Bay Area
Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.
|Elizabeth McGovern: Escrow Services - SF Bay Area
McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.
|Joe Sandbank, Esq. - Legal Services
I have provided legal counsel to business buyers, sellers and brokers for over 17 years. With prior experience as a business broker and SBA loan officer, Joe brings both a practical and legal approach to all aspects of the business acquisition process.
|Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence Services
Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 805-428-2063.
|Diane Boudreau-Tschetter: Escrow And Bulk Sale Services
California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.
|Mark Chatow, Esq.: Legal Services For Buying, Selling Businesses
Mark has a broad range of small business purchase & sale experience from analyzing potential acquisition targets to successfully guiding buyers and sellers through the purchase & sale of small businesses. Mark can assist with contracts, negotiations, legal matters, etc. Reach Mark at 949-478-8393.
|Brad Steinberg, Broker - Laundromat Specialists
PWS is the leading laundromat broker in California. Since 1968 PWS has brokered over 2,500 laundromat sales. With over 90 employees dedicated to the coin laundry industry, PWS has 18 licensed agents, a 3 person in-house finance department, 10 service technicians and a 20 person parts department.
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