As the wave of baby boomer business owners marches into retirement, adding business valuation to your firm’s service offerings is a tremendous opportunity for additional revenue. Successful business owners need to know what their business is worth when they plan their exit, so you’ll be in a great position to help your clients make this transition. Few firms offer business valuation, which means it’s a competitive advantage for those that do.
Here’s what you need to know to get started.
Training is essential. Business valuation is not like tax, audit or bookkeeping. It’s a completely different skillset and a different way of looking at a business. Everything you know about tax and accounting will deepen your understanding of business valuation, and your mastery of the factors that create value will give you useful insights to help all your clients.
Organizations that offer credentials have plenty of courses to get you started. NACVA offers training to qualify as a CVA (Certified Valuation Analyst). The AICPA has its ABV (Accredited in Business Valuation) program and ASA has training to become an ASA (Accredited Senior Appraiser). A simple online search will show you courses from many other organizations.
Or, you can start the way I did when I was learning the ropes under experienced CVAs, and opt for a classic textbook, such as Valuing a Business by Shannon Pratt or Understanding Business Valuation by Gary Trugman.
Consider getting a certification. While no license or credential is required to perform business valuations, when you go through the rigor of courses, exams and practical experience, you’ll know you’re following industry best practices. For example, when some types of valuation engagements require a “qualified appraiser,” you’ll be able to take those on. A valuation performed by a certified analyst is more defensible in case of litigation.
Develop standard templates and procedures. Most valuation engagements are billed out on a flat fee basis, so you’ll need to develop efficiencies to make these engagements profitable. Setting up templates in Excel will save you time in the long run, but make sure the formulas are all correct.
Several companies offer software solutions that perform the calculations, present the data and help with writing the reports. However, software is no substitute for knowledge of the principles. You still have to understand what you’re doing and why. While a pre-written report sounds terrific to accountants and bookkeepers that aren’t the best as wordsmiths, my experience with those reports was less than stellar.
Be aware of applicable standards and guidance. If you’re a member of the AICPA, you’ll have to comply with SSVS1– Statement on Standards for Valuation Services No. 1. Most state accountancy boards have adopted this, so CPAs need to check with their local boards to see if this applies. If you hold a credential, you’ll have to make sure you’re adhering to that credential’s specific standards and guidance.
Market your services. When you’re ready to offer business valuations, you’ll need to let the world know you do this:
- Adding a business valuation page to your website is a good start, but that alone won’t be enough. A few blog posts on this topic can help online searchers find you.
- Your easiest first projects may come from your own clients since they already know, like and trust you. Send out an announcement via email or a letter in the mail to your entire client base to let them know that you now provide this service.
- Create a list of clients who might be good candidates – those who are nearing retirement and who will need a succession plan – and reach out to them discuss the benefits. Don’t overlook your young entrepreneur clients – some of them will be ready to sell their businesses in just a few years, and you can help them get the best price.
- Make sure everyone in your firm knows what business valuations are and when they’re needed. Members of your firm will be your best ambassadors to the public.
- Attorneys and bankers are a rich referral source, so develop relationships with these professionals. Consider giving talks to the local bar association, bankers groups and other business associations.
- Network with other small firms that don’t provide this service. A few lunches can open the door to new opportunities.
Business valuation is a great opportunity to extend your continuum of care as a trusted advisor to your clients, and to work with new clients. Look into it and see if it’s for you!