Business Valuations

First, what are the value components of a business? The appraisal industry is like most others – with its terminology changing over time. For the most recently trained appraisers, the Total Assets of a Business (TAB) are composed of 3 broad classes of property which are:

1) Real property (interests in land and permanently affixed improvements)

2) Tangible property (most commonly used to be known as furniture, fixtures, equipment & inventory) – effectively anything that you could hold or move physically that isn’t part of the real property

3) Intangible property (contacts, business name, client & supplier lists, copyrights, patents, etc. previously referred to as business value, going concern, enterprise value, etc.) – effectively anything that contributes to the business operation that you cannot physically hold

While real property appraisers (AACI designated members) are most qualified to value land & buildings and even many tangibles, a Chartered Business Valuator (CBV) is best suited to value the intangible aspects of a business. Due to the nature of many business operations, the various components to value (real property, tangible & intangible) are unique and difficult to separate from each other, i.e. hotels, bowling alley, health care facility, fast food chains, etc. In these cases, a CBV is very likely your best source of determining value.

Understanding the above, if you have a small business where the real property is general in design and represents the bulk of the value of the TAB and lesser amounts of value to tangibles and intangibles, it may make more economical sense to use a local AACI to value the real property only – and use broader rules-of-thumb to value the other value components.

If you have a medium or large (value) business, I would highly recommend the services of a CBV. Due to their high level of training combined with the lack of large businesses in smaller communities, CBVs generally locate in larger business centers – with none residing in the Lloydminster area. To better serve your needs, Atlas Appraisal Services has formed a business relationship with one of Canada’s only CBV/AACI designated members – together we can provide the best quality service available without the higher costs of having the CBV attend and complete the local analysis required.

Remember, while there is an unlimited supply of information out there (much of it free and misleading), it’s the correct information that is really valuable.

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