Selecting a Business Appraisal Firm
Bigger isn't always better
While professional appraisal credentials in real estate appraisal have been around for decades, a professional designation in Businesses Appraisal is a more recent development. Selecting a business appraiser for litigation, whether it’s a family law matter, estate planning, partnership dispute, failed transaction, or Corp.
Code §2000 case always involves making decisions and tradeoffs. Often this centers around choosing between the local business appraiser or the large national firm from outside the area. This isn’t usually a simple decision, but if the matter is analyzed, the decision should often fall on the side of the smaller, local firm, in order to achieve cost-effectiveness and realize the advantage of access to professionals and the hometown expert’s credibility in front of the local Court.
Size matters. The size of the firm does matter, but less than might ordinarily be the case for other consulting type arrangements. In business appraisal, it’s important to be sure that the local appraiser has the same access to research resources that a larger national appraisal firm would have.
Today, virtually all of the research resources used by business appraisers are readily available online, and every valuation professional office has exactly the same references and resources at its disposal as the 20-professional national appraisal firm. And, it’s important to be sure that the smaller firm has the manpower to do the job within the planned schedule. Often, the smaller local firm is able to respond more quickly and efficiently to demands for quick turnarounds. Our office can usually produce an appraisal within three weeks of receiving the information requested from the subject Company.
It’s the individual. In business valuation, the appraisal is always performed by an individual. This is an important fact, with testimony isn’t likely to be required. In particular, the most cost-effective way to accomplish the appraisal is to retain the smaller especially important implications for litigation. Only individuals, not firms, can be awarded professional credentials.
Further, all of the professional standards to which appraisers conform require that each appraisal report is signed by the appraiser responsible for it. In larger firms, many individuals can sometimes get involved in an appraisal in a support role. It’s happened many times that each of these individuals has to be deposed and examined in order for the appraisal to be admitted. At ABA, all valuation and forensic work are performed by the individual signing the report.
This is an advantage in depositions and trials as the individual performing the work is the same person who is being deposed or providing the testimony. Ultimately, it is the credibility of the individual who signs the appraisal report that carries the day.
Cost is Always a Consideration. Cost-effectiveness should always be a consideration in selecting an appraisal firm, not just for expert testimony, but any kind of appraisal. Appraisal fees vary widely from firm to firm. For example, two appraisal professionals, both with the exact same senior credentials may charge different hourly rates.
The larger firm, with larger overhead, might have to charge $450 to $750 per hour for the professional. A smaller firm, with lower overhead, might charge less 50%-75% of that amount. This is a real example, not a hypothetical worst-case. Our hourly rates are often 60-75% of the rates charged by large-overhead firms. So long as the individual signing the appraisal is qualified, the work-product from the larger more expensive firm will be no better than the one from the smaller firm.
The Same Things Apply to Non-litigation Assignments. All of these same considerations in the selection of an appraiser-expert apply to assignments where the expert professional firm that can give counsel or the estate planning professional the most personalized service for his clients.