What is a Business Valuation Specialist?
Business valuation refers to the process of determining the actual value of a business. Business owners work with a business valuation specialist to help them obtain an objective estimate of their company’s value. They require the services of business valuation specialists to determine a business’s fair value, particularly for the sale of a business, partnership ownership, estate and succession planning, and divorce proceedings.
As fair value reporting and International Financial Reporting Standards (IFRS) become accepted across the globe, the demand for business valuation specialists continues to grow. Business valuation specialists get the opportunity to work with the CEOs and founders of companies across various industries.
Business valuation entails analyzing the capital structure, future earnings prospects, the market value of assets, and objective analysis of the management of a company. To perform the tasks, a specialist must undergo specialized training to equip them with the necessary skills and to obtain certification from the business valuation accredited organizations.
Qualification, Training, and Certification of a Business Valuation Specialist
Most programs that offer business valuation accreditation require business valuation training, either through courses offered at the organization, independent studies, or through affiliation with third party trainers. The certification program requires testing, which may be completed online or in a classroom.
Once the accrediting organizations are satisfied with the candidate’s level of training, they award the candidate their certification. In some cases, the new members must pay an annual subscription fee to maintain their membership in the organization. The specialists are also required to participate in continuing training programs offered by the accreditation organizations.
CFI is the official global provider of the Financial Modeling & Valuation Analyst (FMVA)™ certification program, designed to teach professional financial modeling and valuation techniques to aspiring specialists.
Responsibilities of a Business Valuation Specialist
The business valuation industry requires people who enjoy pursuing challenging tasks. The typical functions of a business evaluator include:
- Financial opinions for litigation matters
- Transfer pricing engagement
- Financial opinions for exit strategy planning and retirement
- Opinions for estate taxation, planning, and succession
- Valuation reports for mergers and acquisitions
- Opinion on future earnings projections
- Business risks
- Valuation report of the assets of a company
Major Business Valuation Accreditation Organizations
Business valuation specialists obtain accreditation from the following organizations:
American Institute of Appraisers (ASA)
Founded in 1981, ASA is one of the most recognized programs among business appraisers. It offers two levels of accreditation: the accredited member and the accredited senior appraiser. The accredited member certification is for professionals with two to five years’ experience in business valuation, while the accredited senior appraiser is for appraisers with more than five years’ experience. ASA also requires the professionals to have minimum educational requirements and to demonstrate proficiency in a demonstration report subject to peer review.
National Association of Business Certified Valuation Analysts (NACVA)
NACVA, which started in 1991, offers two different programs for business appraisal specialists, i.e., Certified Valuation Analyst and Accredited Valuation Analyst. Both certifications require interested professionals to have a minimum of a business degree or a valid CPA license. It also requires them to provide references that demonstrate their experience in the business valuation industry.
Institute of Business Appraisers (IBA)
Established in 1978, IBA is the oldest business valuation program. It consists of standard valuation classes, business appraisal reports, membership, and examinations for the various levels of professionals. It also comprises fast-track options that allow professionals with existing certifications to complete the program quickly. Some of the IBA business valuation programs include:
- Accredited in Business Appraisal Review (ABAR) – The ABAR program aims to provide quality assurance to stakeholders in the business valuation process. ABAR members hold a recognized business valuation credential and have passed evaluations through examinations and a demonstration report subject to peer review.
- Business Valuator Accredited for Litigation (BVAL) – Holders of the BVAL certification must have a recognized business valuation credential, complete a five-day course, pass an examination and demonstrate competency in a presentation and testimony.
- Certified Business Appraiser (CBA) – Holders of the CBA certification must meet minimum educational requirements, pass an exam and demonstrate proficiency in two demonstration reports subject to peer review.
International Society of Business Appraisers (ISBA)
ISBA offers the Business Certified Appraiser certification program. Holders of this certification go through extensive education and testing and must demonstrate their proficiency in valuation by passing a demonstration report subject to peer review.
Salary and Fees of a Business Valuation Specialist
The salaries and fees that business valuation specialists earn are dependent on a number of factors, such as business size, type of assets being valued, etc. Some small business owners valuing their businesses for sale may quote anywhere from $500 to $1,000, based on assumptions on how much the assets are worth.
Valuations that require a great deal of attention may range from $3,500 to $10,000, while those that require outside research and involvement of other professionals may go up to $50,000. When negotiating a business valuation proposal, specialists need to consider the level of effort required, the need for external specialists, the size of the business, and their level of experience. More experienced professionals tend to charge higher fees to compensate for the level of judgment and responsibility that is required in the reports.
Business valuation specialists may also decide to work independently or be employed by large firms that require valuation specialists. Most inexperienced valuation specialists prefer to work for the big accounting firms to help them gain exposure in the industry. On the other hand, the more experienced professionals prefer to work as independent valuation specialists and advisors, which allows them to maximize their annual income.
The work of a business valuation specialist is to determine the economic value of a business or company. They produce a detailed report that is used in a business sale, litigation matters, divorce proceedings, or in establishing partner ownership.
CFI is a global provider of the Financial Modeling & Valuation Analyst (FMVA)™ certification program. To continue your development as a world-class financial analyst, the additional resources below will be helpful: