Business market appraisals and valuations are both assessments of a business’ worth and are appropriate for use in different circumstances.
A business valuation (conducted by a Certified Practising Valuer) is much more detailed than an appraisal.
It comes with a specific value related to the business and verifies that value against the methodology used by the valuer.
A valuation is appropriate if you are seeking a document that can do the following:
Ø stand up in a court of law
Ø be presented to a bank for finance purposes
Ø be used to help settle a dispute
Ø support a share or purchase transaction.
Cost for a valuation would normally be $4,000 to plus $8,000.
A business appraisal on the other hand is a much simpler assessment and a shorter report than a valuation.
An appraisal is usually all you need if you want to know what price to sell a business for or what price to pay.
If you are seeking an 'indicative view' of a business' value, then a market appraisal is a cost-effective means of achieving this.
Generally for a Small Medium Enterprise (SME’s), a business appraisal value is used.
Remember the business is only worth what someone in the right place at the right time with access to the necessary finance will pay for it, and not a cent more!
Any valuation is indicative only, the ‘market’ will provide the selling price.
A business valuation or appraisals are not an exact science.