Most people would think that the business appraisal sector would be a very organized group, but they are not. I recently reviewed an article on a business appraisal technique by a writer from a Business Appraisal Association and half the professional appraisers responding did not agree with the writer.
First off, there is not a single standard method of appraising a business and none of the individual methods used by its self provides an accurate appraisal. There is also a vast divergence of quality business appraisers and business appraisal reports. I classify them into six different groups.
1. The dedicated professional appraisers who mainly do large private corporations and charge large fees to do these complicated assignments. They understand the complexity of business appraisals and provide quality work.
2. The typical small business appraisers may use four or five different methods in the same report and give each method a percentage weight. How they come up with the different weights I'm not sure. It seems as if they have already decided on the appraised value and adjust the weight percentages to justify their final appraisal number.
3. The smoke and mirrors group will fill the appraisal with all kinds of useless reports and complex terminology. I have seen reports that are so grammatically and mathematically complex that they are totally impossible to understand. The writers rely on impressing their clients with their brilliance, hoping the reader can't understand the report enough to realize they wasted their money. These appraisals tend to be extremely inaccurate.
4. There are the on line groups charging very little for an appraisal. They can't afford and probably don't spend much time analyzing the business, its Financial Statements, Tax Returns and other important documents. The sample appraisals I have seen were inaccurate. I spend much more time analyzing the business and its financial documents than I do writing the report. A business appraisal is not an on line fill in the blanks type of report. It takes a knowable experienced expert who will take the time to truly analysis the business.
5. Those that use the capitalization rate and rule of thumb methods are providing their clients with the average value of all the business used to determine the capitalization rate or rule of thumb numbers. Each business is different and an appraisal has to address the specific parameters of the business being appraised to be accurate.
6. The blended method uses a combined report using the cash flow, asset and market value approaches to determine the business value. This blended method looks at all the elements that create value in a business and provides an appraisal unique and accurate for each business appraised. This method consistently works.
Most of the inaccurate appraisals I have seen appraised the businesses with a much higher value than they were actually worth. Some of the values were three times higher than the actual value. It also seems like the larger and more complex the reports, the less accurate they were. Quantity over Quality.
About The Author: Bob Klien is President and owner of Business Appraisals, providing Market Value business appraisals on all types of businesses. Former President and owner of Business Search, Irvine, California, a Merger & Acquisition firm specializing in the sale of manufacturing, distribution and related businesses, with programs for both buyers and sellers. Phone Bob direct at 949-254-4062 about more information regarding business valuations.
|Helpful Resources To Assist In Selling And Buying California Businesses|
|Matt Weiler, Business Broker: Gas Station Specialist
Business Broker Specializing in primarily gas stations. Geographic area of focus: San Francisco Bay Area to Sacramento and as far South as Monterey, California. To sell or buy a small or large gas station phone Matt (gas station business broker specialist) direct at 408-623-0920.
|Timothy Cunha, JD - Business Broker, SF Bay Area
I am an experienced entrepreneur, attorney, & business professor. I & my EvergreenGold team offer business owners sound advice & expertise to build business value & achieve profitable sales. Call me today for a FREE business evaluation & SWOT analysis for your business anywhere in the USA.
|Peter Siegel, MBA - SBA Loans, Non SBA Financing Assistance
For over 25 years I have provided niche business purchase financial advisory and loan placement services with SBA and Non-SBA Loans, Retirement Plan Conversions, Private Investors, etc. Financing amounts available: $20K to $7MM. Call today to get pre-qualified or receive financing: 866-270-6278.
|Prabhjot Randhawa, Broker: SF Bay Area, Northern Central Valley
I'm a Business Advisor at Liberty Business Advisors of San Fransisco. I have over 20 years of experience in all phases of entrepreneurship. During the past 15 years my concentration has been in business of mergers and consulting. I have owned and operated over 10 businesses.
|Jack Oh, Business Broker - LA, Orange Counties
Business broker and real estate services in the Los Angeles and Orange County areas. 10 years experience with great negotiating skills. To sell a business or buy a business in the LA or Orange County Areas phone Jack and his team at 562-787-4989.
|Rick Carlson, Business Broker - Southern California
You Will Never Feel Lost In The Shuffle. Many Brokers Simply Send Out An NDA And That's The End Of Communication. All Buyers Receive A Personal Meeting With An Ace Acquisition Specialist So They Can Recommend The Perfect Business For You. Phone Rick direct at 800-985-4939.
|Michael Floorman, Business Broker, BTI, San Francisco Bay Area
Business Team, San Jose (Campbell) located in the Pruneyard Towers at Bascom and Hamilton. Established in 1981 Business Team with over 6600 sales to date has 1000 business listings to choose from, paid Google advertising. We offer highly trained and experienced professionals.
|George Lanza, Business Broker, At Plethora Business Sales
Plethora Businesses, a division of A Premier In Services, Inc., is a Business Intermediary Consulting Firm headquartered in Orange, California. Plethora specializes in the listing and sale of small and medium sized private businesses.
|Related Articles, Events, Blog Posts, Discussions, Videos, Interviews|
|Buying A Restaurant With Financing: 5 Options For Restaurant Business Buyers
In this Discussion, Peter Siegel MBA (Business Purchase Financing Advisor at 925-785-3118) discusses financing of purchasing a small to mid-sized restaurant business (with or without real estate). When it comes to financing a restaurant, potential restaurant buyers have many options to choose from.
|Specialty Restaurant Broker Discusses Liquor Licenses & Working With The ABC
What you will read in this BizBen blog post you will probably not find in any manual or set of instructions provided by the ABC (liquor licenses in California). This blog post by Jeff Back (SF Bay Area Restaurant Broker Specialist) at 925-736-8200 discusses this topic of liquor licenses in detail.
|FREE Webinar: Buying Or Selling San Francisco Restaurants - Best Practices
This informative 40 minute interview/webinar about buying & selling restaurants in San Francisco with restaurant broker specialist Cheryl Maloney is a real eye opener for restaurant buyers and sellers. Cheryl gives great advice to both buyers and sellers from her years of experience in the industry.
|Tips From A Restaurant Broker - Check A Restaurant For Karma Before You Buy
Jeff Back (925-736-8200), a SF Bay Area broker specialist who specializes in selling restaurants discusses what he looks for when sizing up a potential restaurant for sale. Do the restaurants you're thinking of purchasing have good Karma? See Jeff's insights into this topic on restaurant karma.
|Liquor License Assistance - SF Bay Area - Jim Saxton
Jim Saxton - 20 years experience of local governmental requirements, such as Police Departments, Zoning / Planning Departments, ABC District Offices, my company Liquor Licenses of SF Bay Area is very qualified to resolve all of your concerns during the liquor license transfer process. 925-787-0770.
|Buying A California Gas Station: Top 5 Risks For Gas Station Business Buyers
Those seeking to buy gas station business opportunities need to know about five factors that can make this purchase particularly risky compared to other businesses. Peter Siegel, MBA (BizBen ProBuy Program & Business Purchase Financing Expert) at 925-785-3118 discusses this topic about gas stations.
|Why Restaurant Buyers Typically Fail: Best Pro Tips For Buying A Restaurant
Buying a restaurant (no matter what type) can have many pitfalls, and potential restaurant buyers should know how to avoid getting burned! Several restaurant intermediaries and advisors weigh in on this BizBen Discussion about the best way to find, purchase and run a restaurant successfully!
|Restaurant And Fast Food Franchises - Successful Tips From Franchise Buyers
Restaurant franchise offerings are among the most popular of the business types potential business buyers seek. What many would-be owners don't realize is that there are specific tips for buying fast food or restaurant franchises that don't necessarily apply to independent restaurants for sale.
|See All News, Tips And Events|