I walked into a small, confined industrial shop with my client and looked around. I immediately recognized the blood, sweat and tears that had been poured into this company over the years. Could someone put a value on this business, built from the bottom up, supported by reputation and good will, and the hard work ethic of the employees? The owner (seller) looked at me and asked how a valuation of his company could be determined, what would be needed, and what to expect in terms of cost, time frame, and future valuation needs. The owner was selling his business and we had been hired to value the company for the buyer. It helped to explain to the owner the importance of a valuation, the documents and information that would be required in order to complete the valuation, and what expectations he could expect from a valuation.
In this article, we will address those same issues regarding valuations and also identify the major components of a valuation. First, we will present the various purposes of a valuation and what you need to have one completed. After that, we will discuss the qualifications of an appraiser, how the valuation is done, and what to expect from the results of the valuation.