Selecting a Valuation
Professional
R.J. Reese & Co. encourages you to
follow these guidelines when selecting a valuation professional:
Cost and Credible Results
The client's first objective must be to obtain a credible
result. This is especially important when there is a
significant amount of money at stake or the valuation is subject to
challenge in a dispute setting or has exposure to IRS examination.
The cost of providing a valuation will depend primarily upon the
intended use of the valuation and the extent of the research and
analysis required to produce credible results. Credible
assignment results require support by relevant evidence and logic.
A valuation analyst must be prepared to support (and document in the
report) the decision to exclude any investigation, information,
method, or technique that would appear relevant. Conditions placed
upon the analyst by the client to limit the scope of work in an
effort to reduce cost must not limit the scope of work to such a
degree that the assignment results are not credible in the context
of the intended use of the valuation.
Professionalism
Your valuation professional will have access to some of your
most confidential financial information, so trust is important. Most
appraisers will have an introductory meeting with you at no cost.
Here you can decide how comfortable you are with the analyst, both
personally and professionally. Will he or she be the individual actually
performing the analysis or is the work performed by someone else
inside or outside the firm? The size of the analyst's organization
is not necessarily an indication of his or her ability to provide
the business valuation expertise you need. Determine whether you be given the
personal attention you need. Don't be reluctant to ask for
explanations of terms you don’t understand.
Valuation Process
Ask questions about the valuation process. What valuation
approaches and methods will be used for your particular assignment.
Be careful with the blind application of averages. Every
business is unique and its value can be highly sensitive to
assumptions used by the analyst.
Professional Designations
Valuation professionals may hold one or more designations that
represent their competence in specific areas of their profession.
For example, some analysts hold the highly regarded Chartered
Financial Analyst (CFA) designation. Ask your valuation professional
about any educational, ethical, or work experience requirements that
must be met in order to be awarded and hold the designation. Compare
the areas of competence represented by the designation to the skills
you are searching for in a valuation professional.
Be aware that "CPA" is not synonymous
with "business appraiser." Valuation is a finance and investment
discipline, not an accounting discipline. A majority of
valuation professionals are non-accountants with specialized
credentials and experience in finance and valuation. The CFA
designation is the most highly regarded professional investment
designation in the world. Be sure the valuator you engage has
specific business valuation training and possesses knowledge that
goes beyond traditional accounting. One indication of that training
and knowledge is certification through one or more recognized
valuation organizations.
