What Makes a Fast Business Valuation?

In relative terms, how fast is considered fast enough in the service sector? What value does a hastily completed business valuation add to a business? Let’s face it- business appraisement can be a time-intensive process. Getting your appraisal strategy right involves hiring an experienced valuer. Thus, working with one of the expert business valuers serving all of Melbourne can deliver the results you need. But first:

What Factors Affect the Valuation Process?

Online software can deliver a quick assessment if that’s what you are after, but this can compromise quality and may only include a few details. A broader assessment that evaluates or incorporates various elements is likely to take longer to deliver. 

Simply put, the more details you need to integrate into an appraisal, the more time a valuer may need to complete the process. This means a valuation might take a week and up to four weeks. Generally, the following factors affect the duration an assessment takes: 

• The extent and nature of available information- credible information is likely to expedite the process.
• Existing business structure- the more complex a business model, the longer it might take to prepare an extensive estimation.
• Purpose- an estimate for a merger or acquisition is likely to take more time than a business valuation for investment purposes.
• A business’ need- if an entity needs a fast assessment, the valuer may need to fast-track the process to deliver results quickly.

Let’s dive deeper by looking at a few of these elements in greater detail. In doing so, you can gain a better understanding of how they can affect your business’ appraisal process.  

Purpose of the Valuation 

What’s your business’ rationale for a valuation? Do you want the assessment to facilitate a commercial transaction? Are you after resolving a commercial dispute? You may need an accurate estimation for several reasons: to secure bank finance and debt, to satisfy your tax obligations, to set a realistic price if you plan to sell part or all of the business at some stage in the future, or to know what your business is worth.

The valuation’s purpose affects how long the entire process takes, as earlier noted. Perhaps an example should suffice to clarify matters, hopefully. 

Let’s suppose you need an assessment to support a transaction. In such a case, a valuer may need to sit down with the company’s executives to establish the aspects worth considering and the approach to adopting. If the valuer needs to assess the company’s net assets and cash flow potential on a going-concern basis, then you can’t expect quick results. Other aspects, such as fixed assets, may need an independent valuation to charge interest or rent against them. 

Likewise, what is at stake can affect the direction the estimation process takes. For instance, if an appraisal affects a business’ future, as often happens in commercial disputes, a credible appraisal that provides a more accurate assessment would be required. Undoubtedly, this would call for considerable investment in terms of time and funds to deliver a defendable estimate.  

Business Complexity

It can take up to a week to collate relevant information pertaining to a business with a complex model or structure. The valuer may also need extra time to go over specific issues or concepts with a client to create a basis for an assessment. Unfortunately, rushing through the process could lead to costly errors of judgment. 

If everything is in order, data analysis may commence a day. A valuer also needs to get an insider’s view of the business’ background by interviewing the client. A day or two would need to be set aside for this.   

Plus, a reported assessment may be inaccurate or need further fine-tuning to achieve reasonable conclusions. The back and forth between a valuer and a client as the former attempts to gather feedback and coalesce opinions to reshape the final report can be time-consuming. 

Similarly, a formal valuation that utilises multiple appraisal methods is likely to take up to two weeks. In contrast, informal evaluations tend to take less time. If we also factor the valuer a business hires into the equation, it’s easy to see that the approach can vary from one institution to the next, and so would the time taken to complete an appraisal. 

Conclusion

Overall, there are no hard or fast rules defining how long a valuation should take. But, it all depends on a client’s needs, among other factors. While automated processes can deliver quick results, a valuer’s hands-on approach can take time to produce valuable results. If you need a credible or accurate business assessment, consider hiring a valuer from a reputable firm.