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What a Business Appraisal Can Do for You
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As you look to sell your business or create a succession plan, a business appraisal plays a critical role in determining your company's real value. Here is what you should expect to learn -- and to do -- through the process.

A business appraisal, or valuation, is an independent assessment of your company's value in the context of market conditions and different scenarios. The most common standard is "fair market value," which is the cash (or cash equivalent) price that would change hands between a willing, unpressured and well-informed buyer and a seller on equal footing.

To ensure that the appraised value will be accepted by a purchaser or a court of law, contract with an Accredited Senior Appraiser from the American Society of Appraisers, or a Certified Business Appraiser from the Institute of Business Appraisers. Expect to pay less than $10,000 for a limited appraisal, or more for a comprehensive appraisal. And agree upon the cost before the appriaser gets started.

Then, prepare for the appraisal process, which usually takes about a month to complete. Include your CPA, banker and lawyer in this process, even your meetings with the appraiser. Here are the steps to expect:

  1. Assemble financial statements. You'll need documentation from the last three years, including inventory data. Also, gather your equipment list, including the purchase date, original cost and photos of each item; recent real estate and equipment appraisals; and brochures or general company information.
  2. Talk through the specifics of your business. Tell the appraiser about the company's management structure and capabilities, bonus programs and employment agreements -- and about personal assets that should actually be reflected as business assets, outstanding personal guarantees and aging receivables.
  3. Take a walk-through. As you do, give the appraiser the details about whether the property is owned or leased, whether it meets regulatory requirements and whether it's environmentally sound. The cleanliness and organization of your facilities can also affect your business's value.

If you found this article helpful, you might also want to listen to our podcast: Obtaining a Business Appraisal

 


The article you read was prepared for general information purposes by McMurry. These articles are for general information purposes only and are not intended to provide legal, tax, accounting or financial advice. PNC urges its customers to do independent research and to consult with financial and legal professionals before making any financial decisions.These articles may provide reference to Internet sites as a convenience to our readers. While PNC endeavors to provide resources that are reputable and safe, we cannot be held responsible for the information, products, or services obtained on such sites and will not be liable for any damages arising from your access to such sites. The content, accuracy, opinions expressed, and links provided by these resources are not investigated, verified, monitored or endorsed by PNC.