Is Business Appraising for You
Skills you need to value businesses. Valuation is about setting the price--a demanding service someone has to perform. So who are the CPAs making their living evaluating the fair market value of business entities? They are a mixed bag. For some, offering business valuation (BV) has been a natural outgrowth of estate planning. Others have started as expert witnesses for attorneys litigating a divorce, dissolution of partnership or other disputes. Many have found their way to performing valuation services from business and industry careers in finance, investment banking or corporate tax. What brings such a diverse group of CPAs to share this professional path? Most say they love the niche. "Without a doubt, business valuation is the most exciting part of accounting" says Cyril Mandelbaum, CPA, of Clifton Gunderson in West Des Moines, Iowa. Mandelbaum was in general litigation support services when a lawyer she worked with suggested she would make a great BV professional. Mandelbaum since has earned three BV designations (ABV, AM and CVA; for designations, see page 31) and is now regional director for business valuation at the firm. Barry Sziklay, CPA, ABV of Cipolla Sziklay Zak & Co., LLC, in West Orange, New Jersey, says his experience as an investment banker gave him the drive--and confidence--to pursue BV. Sziklay worked at an investment banking firm in Manhattan for ten years. Accounting, investment analysis and tax planning formed the backbone of his expertise in business valuation. Both CPAs love the appraising business. They earn more now that they offer this service, and they feel good about the opportunity to spread their wings beyond the scope of traditional accounting. Sounds great, but is it an option for everyone? Sziklay says that BV is a highly challenging business requiring an unusual set of skills. "It is not for the faint of heart," he says. To learn if you have the right stuff to pursue a career in business valuation and how to get the training you'll need to do it, read on. WHAT IT IS A CPA who performs a BV engagement must determine the value of a business, often a privately held business. "Clients may request a business valuation for a variety of reasons, including financing, income tax, estate tax, gift tax, buy-sell agreements among partners and S-to-C-corporation conversions," says Sziklay. "Since such things are not bought and sold every day, you have to have a method of determining their value." Practitioners generally use several methods to calculate a business's value; then they integrate the findings in a comprehensive report to the client. CPAs are well prepared to analyze the numbers, but Sziklay says that the quantitative aspect is based on theories of finance, not GAAP. In other words, being able to understand a financial statement does not mean a CPA automatically will grasp the true market value of the business. WHAT THE BEST HAVE IN COMMON Regardless of how they come to the business valuation field, successful BV practitioners share many traits. Although quantitative skills are essential, "soft" skills matter just as much. CPAs who have been successful offering BV tend to * Function well under intense pressure. * Communicate well, both orally and in writing. * Integrate quantitative and subjective data. * Be unfazed by ambiguity and uncertainty. * Improve their skills constantly through ongoing professional education. * Market themselves continuously. DEALING WITH PRESSURE You might think of business valuation as "extreme accounting." By its nature, the process pits a CPA's ethical objectivity against a client's agenda. BV clients have a specific goal, such as setting the value of a partnership dissolution, divorce or tax issue. They also have a clear idea whether a high or low valuation will benefit them most. …