Business Appraisals with Fred Hall
Fred Hall, CEO of Amador Appraisals and Acquisitions, joined me on Money 2.0 to discuss the complexities of business appraisals. Fred specializes in business valuations for SBA loans, IRS valuations, divorce, and minority share owner appraisals.
Fred discusses the wide gap in what a business appears to be worth between business owners vs. business buyers. He says often a business owner will place a great deal of value on the specialization of their business, however Fred says that this trait simply does not translate into attracting buyers. He says buyers have more options than sellers and can compare businesses and industries when considering where to invest. Fred notes that it is not uncommon for him to be see a buyer looking at a grocery store franchise one week, only to end up buying an X-ray technician company the next.
Fred briefly notes the lengthy process involved in obtaining a CBA (Certified Business Appraiser) accreditation, which he underwent via the Institute of Business Appraisers. He goes on to discuss the numerous types of business valuations that exist, pointing out that they often can result in quite significant different dollar amounts.
Fred outlines the complexities involved with minority interest valuations. He says these come to play with the owner of business wants to gift shares of the company to family or in cases where the owner dies. He says the key difficulty in selling a minority share interest is that it is hard to attract buyers to a company where a shareholder has virtually no control over the company. Fred says every situation is very unique.
There is also some discussion on how few business owners set up a Buy/Sell Agreement. Both Fred and I share our experiences with client business owners who have failed to take this step. We agree that Buy/Sell Agreements are extremely important to setup prior to taking on or starting a business between 2 or more people. It is much like a marriage prenuptial agreement. Buy/Sell Agreements allow partners to make decisions on how best to protect interested parties prior to an emergency situation or emotional breakdowns in partnerships that can occur when a partner dies or there is a divorce between partners.
If you would like to hear my conversation with Fred Hall, please click here.
