There are any number of reasons to have a business appraised or, to use the industry terms, prepare a business valuation. Although we still will provide appraisal services for marriage dissolutions and shareholder problem resolutions for a few selected attorneys who believed in us when we started back in the 1980’s, almost all of the work we do today is for two specific purposes. The two appraisal uses are (1) Estate or Gift Tax Filings and (2) Effective Business Planning.

Estate or gift filings require a full, formal report, while business planning typically only requires an informal, limited, restricted report that focuses directly on the information that the business owner wants and needs. In either case, a full analysis of the business is preformed and all financial schedules are prepared. The difference is in the reporting format, the personal method of delivery, and the intended use.

Here is How We Work

After a no-charge introductory meeting to determine the business owner’s requirements, historic information concerning the business is requested. Once this information is received a preliminary analysis of the industry and the business is completed. At that point, a meeting is scheduled with the business owner. This meeting normally takes half a day and includes a full tour of the operating entity. Additional information, and or additional meetings may be scheduled to complete an in-depth analysis of the business. Once this phase is finished, the valuation analysis is completed and the report is prepared. If a formal report is required, the appropriate level of detail for use in tax or gift filing is included in the written report. If a limited report is indicated, the economic analysis, industry analysis and specific company analysis are reported orally to the business owner. The written report, which is restricted in its use, will contain all of the financial analysis, but very little text. This analysis, the thinking associated with the analysis, and the key value drivers are identified at the meeting with the business owners.

We deliver these two levels of reports because it saves the business owner time and money. In addition, the oral reporting format provides us with an opportunity to be sure that everything is fully explained and completely understood. Consequently, the business owner can immediately use the information to improve the planning process and to initiate indicated actions.

For example, in a recent assignment we were able to isolate the value drivers, identify three ways to reduce costs significantly, and help focus the business owner on the actions required to effect the change. These changes resulted in a 42% increase in free cash flow…which will significantly increase the value of the business over time.

When we are considering representation of a client in the sale of a business, we always suggest a preliminary phase, which proceeds the formal engagement. This key step helps in timing the sale of the business. In this preliminary phase, a business valuation (in the limited, restricted form) is prepared to provide a full understanding of the “current fair market value” of the business and its relationship to the owner’s ultimate price objective. This is structured as a separate engagement and does not require or indicate that Management Services & Development, Ltd. will be involved in the planning and execution of any future ownership transfer.

This valuation process is like having a blood test before an operation. Just as you would not want your surgeon to operate without knowing everything of importance, you do not want to make this critical business decision without all the necessary information.

How We Are Compensated for Our
Business Valuation Services

There is no magic to the way we charge for business appraisal services. Our fees, like those for all professional services, are based on the time we invest and the value we contribute to the final products our clients need. There are two fee structures: one for full-scale valuations and one for those requiring less time and effort.

Clients need full-scale appraisals when they must have a report which provides a well-documented, defensible value. The cost of such formal appraisals is normally between $12,000 and $15,000.

We can normally provide preliminary information for client’s and advisor’s reviews within 30 days of receiving ALL the valuation information we need (i.e. historical financial statements and data about the business).

Fees are less for limited scope appraisals such as family limited partnerships, when the assets in the partnership are already valued. Similarly, transactional engagements where value range estimates based on full analysis, but limited text will suffice, such as in valuations in contemplation of a sale or purchase of a business or in strategic planning, typically cost $7,750 per entity.

Introductory client consultations are always free, and no chargeable work is performed until there is agreement on exactly what is needed and what services will be provided. We also provide tailored consulting and appraisal review services to meet specific client needs. (Consulting services, once the scope of work is established, are provided at a $2,000 per day rate.)

Succession planning is never easy! But we can reduce the stress and help you develop the best personal exit strategy. If you are contemplating an ownership transfer (a sale or gift within the family), in the next 2 to 5 years, now is the time to develop a valuation baseline to assure that your planning will be effective.

Our telephone number is: 814-938-8170. Don’t hesitate, call today!

We will schedule a confidential meeting are the earliest possible time to meet your initial objectives.