• Purpose
• Type of Business – C or S Corporation, LLC, Partnership
• Business Interest – Common or Preferred Stock, Assets, Invested Capital, Specific Intangible Assets, Options or Warrants
• Level of Ownership – Controlling or Minority
• Effective Date
• Appraisal Scope

The next step is to qualify the engagement and the appraiser. The Uniform Standards of Professional Appraisal Practice (USPAP) obligates the appraiser to be familiar with the specific type of property, the market in which it sells, and the analytical methods used to value the property.

In addition to supplying the above information and an overview of the business and its markets, be prepared to supply previous three years financial statements, forecast, and capitalization table. With this, you and the appraiser will be able to qualify the engagement.

When qualified, parties execute an engagement letter that defines the appraisal assignment – stating the information above and an estimated cost budget and time line for the deliverable. Costs and lead time are dependent on the purpose, scope, and quality and timeliness of the information supplied to the appraiser.

Once engaged, the appraiser gathers information and interviews management.  Follow this link to an information checklist for business valuation. The appraiser also collects relevant economic and industry data – as well as financial information on guideline public companies and M&A transactions.

The appraiser conducts a qualitiative and financial analysis of the industry and the subject company. Financial statements are adjusted if necessary and reviewed against trends and ratios. Company strengths and weaknesses are analyzed from a valuation perspective.

Referencing Definitions and Approaches, the appraiser selects the appropriate valuation approaches and quantifies the value employing these approaches and methods. Disparities between approaches are reconciled and a final value conclusion is reached.

USPAP defines the content and level of information required in communicating the results of an appraisal and depends on the user of the report. A restricted use report that summarizes inputs and analysis is possible only when the report may be understood properly without additional information from the appraiser’s workfile.