What is the National Association of Certified Valuators and Analysts (NACVA)?
The National Association of Certified Valuators and Analysts, typically referred to as NACVA, was created to make it easier for a business looking to be appraised. NACVA offers a variety of services, one of the most important being certifications for business appraisers. It is specifically helpful because an individual from within a company can become certified and appraise the business.
The NACVA was formed largely because business valuation was previously the responsibility of certified public accountants (CPAs) using a wide range of methodologies to calculate the numbers. Using different ways to calculate and assign value to companies, the valuations were, at best, inaccurate and, at worst, missed the companies’ values entirely.
Business valuation is of critical importance for companies because it helps determine a company’s worth. It helps the company then set prices for goods and services, as well as determine what employees can and should be paid, and what the company should be selling stock shares for. It also helps investors determine if they should invest in the company.
The National Association of Certified Valuators and Analysts, typically referred to as NACVA, was created to make it easier for a business looking to be appraised.
The NACVA carefully reviewed the wide range of methodologies used to assign values to companies. Over a period of time, the methodologies were rigorously tested for accuracy, and the best were put forward as standards.
Reports from professionals accredited through the NACVA give detailed information that can help a company improve its inner workings, make its production more efficient, and ultimately boost its bottom line.
History of the National Association of Certified Valuators and Analysts
The National Association of Certified Valuators and Analysts was formed in 1990 to help address inaccuracies in business valuation. The first step NACVA took was to carefully review the wide range of methodologies used to assign values to companies. Over a period of time, the methodologies were rigorously tested for accuracy. Each methodology was tested in several different aspects, namely:
For their adherence to previously established laws
How they held up in terms of insurance
Their impact on finances and taxes
The methodologies that proved to be least efficient, least accurate – or that tried to avoid legal lines – were weeded out, and a collective set of methodologies to be used were settled upon.
During the period, the NACVA began certifying some 35,000 financial and accounting professionals, including valuation specialists and CPAs. Most of the professionals took one or more of three certification programs: Accreditation in Business Appraisal Review (ABAR), Certified Valuation Analyst (CVA), or Master Analyst in Financial Forensics (MAFF).
How the NACVA Affects a Company’s Valuation
Let’s get more into the specifics of how the NACVA works to affect a company’s valuation. The association’s primary contribution is to ramp up the amount of detail and accuracy within a valuation report. The methodologies outlined within the certification protocols of NACVA enable appraisers to include critical numbers in their valuation of a company, including:
The numbers help companies see where they are doing well and where they are falling short. It can help them pinpoint departments that need to be scrutinized more carefully and even help identify employees or departments that need to be changed.
Appraisal reports also tend to include information about the company’s position within its industry. It means the company can use that information to either cement their position or improve it. The report will also often include information about the industry as a whole: growth projections, general health, and how it’s being affected by different factors.
All the information is critical for a company because it helps it understand how sustainable it is and what it may need to do to branch out if industry projections are low.
CFI is the official provider of the global Commercial Banking & Credit Analyst (CBCA)™ certification program, designed to help anyone become a world-class financial analyst. To keep advancing your career, the additional CFI resources below will be useful: