Over the last two articles we covered the two formal valuation engagements. A Conclusion of Value is the full engagement, built to hold up in court, with the IRS, or in a transaction. A Calculation of Value is faster and narrower, useful when you need a number to make a decision rather than defend one.
There is a third category, and it is the one owners ask about most often once they understand the first two. Sometimes you do not need a report at all. You need an answer.
Valuation consulting usually starts with a specific question rather than a general one.
Someone made you an offer. You want to know whether it is a good deal before you sign, and you want to know it this month, not next quarter.
Your buy-sell agreement is out of date. It was written years ago against a business that looked different than it does now. You want to understand the gap before it matters.
You are heading into a negotiation. You would rather not be the only person in the room without a number.
You are allocating a purchase price. The deal is happening and you need support for how the pieces get assigned.
You are in a dispute and need someone who can explain the numbers under scrutiny.
In each of these, the question is narrow and the timeline is real. A formal report would answer it eventually. It would also cost more and take longer than the decision in front of you allows.
This is the flexible category. It sits outside the formal valuation standards and falls under consulting standards instead, which is what gives it room to be shaped around your question.
Common engagements include:
Scenario modeling, meaning what the business looks like under different assumptions
Buy-sell agreement review
Purchase price allocation support
Deal negotiation input
Expert witness support
Pre-transaction advisory
There is no report at the end. There is a conversation, a set of numbers, and an understanding of what they mean for the decision you are making.
Because there is no formal report, there is nothing to hand a court, an auditor, or the IRS. That is the point of the format, not a shortcoming of it. If what you need is defensible, you need a Conclusion of Value, and we will tell you that. Consulting is the right fit when the audience for the number is you and your advisors.
This is worth saying directly, because owners often assume the consulting conversation is a sales funnel into a bigger engagement.
Sometimes it is. You start with a question, the picture gets more complicated than expected, and it becomes clear a formal engagement is warranted. That happens.
Just as often, the opposite happens. You get your answer, you make your decision, and you find out you never needed a full valuation to begin with. That is a good outcome. It means you spent what the question was worth. Either way, you stop guessing.
Start with the decision you are actually trying to make. Not the document you think you need, the decision. If you can name what you are deciding and when you have to decide it, that is usually enough for us to tell you which of the three engagements fits, or whether you need one at all.
Conclusion of Value: https://youtu.be/sFJrg4JEu6A
Calculation of Value: https://youtu.be/5oDvLAq4wKY
Valuation Consulting: https://youtu.be/ObI-YhmYwrI
Questions about which one fits your situation? Contact Brinker Simpson & Company.
Tom Saris is a CPA, Certified Valuation Analyst (CVA), and Certified Fraud Examiner (CFE) at Brinker Simpson & Company. He helps business owners understand what their company is actually worth, and why.