Top 5 Questions To Ask A Business Valuation Expert Before You Sell

The sale of your business is a big decision, both emotionally, financially and strategically. When you are considering retirement, a merger, or a transition to a new enterprise, it is important to understand the real value of your business so that you can get the deal you want. That is where a business valuation expert is needed.

Not every valuation professional is the same. The difference between the selling experience and the result can be substantial depending on your choice of the right one and the right questions. These are the top 5 questions to ask a business valuation expert before you proceed with any sale so that you can be sure you are dealing with someone who can correctly value your company and take you through the process.

Table of Contents

• 1. What Is Your Experience in My Business?
• 2. What are the Methodologies You will Use to Value My Business?
• 3. What Information and Documents will you require of me?
• 4. What Will You Do with Intangible Assets and Goodwill?
• 5. Will You Help Me in Negotiations or Buyer Inquiries?
• Conclusion: Find The Right Answers Before You Sell

1. What Is Your Experience in My Business?

Each industry has industry standards, market trends, and valuation issues. A healthcare business is not appraised as a business in the tech, manufacturing, or retail industry. The first thing you should do is to ask your business valuation expert whether he or she has experience in dealing with business of your type.

A professional with experience in your industry will know what value is being created in your industry, how to compare yourself to the competition, and what buyers expect. They will also be conversant with any regulatory or operating peculiarities that may influence the value of your business.

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2. What are the Methodologies You will Use to Value My Business?

The professional business valuation services have a number of accepted methods among them are:

• Asset-based valuation
• Income approach (Discounted Cash Flow)
• Market approach (Comparables Sales, or EBITDA multiple approach).

The best method will depend on the type of business you have, its financial condition and the reason behind the valuation. An expert in business valuation must be in a position to describe the method(s) that he/she will apply and the reason.

This question will allow you to determine the level of transparency of the expert and make sure that the valuation process is not a one-size-fits-all solution.

3. What Information and Documents will you require of me?

The quality of information given is very crucial in the accuracy of a business valuation. Ask the professional to take you through the information that they will need and usually this will include:

• Financials(3-5 years)
• Tax returns
• Customer-supplier contracts
• Information on intellectual property
• Staffing/employee/organizational structure
• Liabilities and debt Debt and liabilities

Knowing this beforehand will help you organize your papers and reduce the time wastage. What is more important is that it demonstrates how comprehensive the expert will be in the analysis of your company.

4. What Will You Do with Intangible Assets and Goodwill?

Brand reputation, customer relationship and proprietary technology are examples of intangible assets that may form a large part of the value of a company. These are aspects that an experienced business valuation expert will understand how to evaluate and measure, particularly in case your business is service-based or IP-driven.

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When the professional skims over this question or is unable to articulate how they will approach it, this can be a red flag. Good business valuation services will take into account tangible and intangible value drivers to provide you a complete picture.

5. Will You Help Me in Negotiations or Buyer Inquiries?

Valuation is not the only aspect of selling. As soon as your business goes to the market, there is a possibility that potential buyers will question the valuation report. A first-rate business valuation expert must be prepared to assist you at this stage, namely, to explain the valuation to potential buyers, justify assumptions, and explain any complicated numbers.

They add credibility and possibly can create confidence in the buyer and this can speed the transaction and make sure that you get full value.

Conclusion: Find The Right Answers Before You Sell

The right business valuation expert will make all the difference in the success of your sale not only in the price you will get, but also in the ease of the process. These five key questions will help you in selecting an advisor that knows your business, uses the correct valuation techniques and will be with you during the transaction.

My Taxman provides professional and reliable business valuation services to meet your business and goals. Our professionals offer clear valuations using information that places you in a position to succeed when you are planning to sell, when you are seeking to raise investment or when you are restructuring.