A true appraisal is a thorough analysis of the practice, including listing and valuing all of the hard assets. Several possible avenues are explored to find the appropriate method to find the value of the entire practice, including the intangibles. These methods include, but are not necessarily limited to, the summation of assets, capitalization of earnings, and comparable sales. The final opinion is presented in a written report in three copies.
There are many reasons for having any business appraised, some of the most common being:
Contemplated Sale of a Business – the business is appraised to determine what would be a reasonable price for the seller to ask for it.
Purchase of a Business – an appraisal provides the potential buyer with an independent and unbiased opinion of the value of the business before making a commitment to purchase.
Determination of Loan Value – because it includes the effect on total value of assets that may be undervalued in a conventional accounting analysis, a business appraisal may support a greater borrowing capability than would otherwise be the case.
Buy-sell Agreements between Owners – when there is a buy-sell agreement between owners of a closely-held business, a third party appraisal is the best means of determining value for the purpose of the agreement.
Condemnation Proceedings – such as those brought by governmental authorities and requiring a determination of the value of the business or portion of the business that will be lost as a result of the condemnation action.