The purpose is important. A valuation for a sale process may have different requirements for the report and supporting documentation than a valuation for an employee stock ownership plan. It is therefore wise to choose a firm that has proven experience with your specific issue.

Checklist: 10 Criteria for Selecting a Specialized Valuation Firm

How do you know if a firm is sufficiently qualified to value your company? The checklist below will help you compare different providers.

1. Does the firm have Register Valuators (RV)?

One of the first things to look for is the professional qualifications of the valuation experts. In the Netherlands, the Register Valuator (RV) is the specialist in the field of business valuation.

The title “Register Valuator” is awarded by the Dutch Institute for Register Valuators (NiRV). To be eligible to use this title, a professional must successfully complete a specialized postgraduate program in Business Valuation and meet the NiRV’s registration and admission requirements.

This is important because a Register Valuator not only possesses financial knowledge but is also specifically trained to assess and substantiate complex valuation issues.

In addition, Registered Valuators are bound by codes of conduct and professional rules and are required to undergo continuing education. This ensures that they continue to develop their professional knowledge and that professional standards in the areas of expertise, integrity, and independence are upheld.

Please note: the RV title is a personal professional designation and not a certification for an entire consulting firm. Therefore, be sure to verify that the person who is actually responsible for your valuation is registered as a Registered Valuator.

You can find more information on the website of the Dutch Institute for Registered Valuators (NiRV).

2. Does the firm have experience in your industry?

A company’s value is partly determined by the market in which it operates. Every industry has its own characteristics, growth prospects, margins, risks, and valuation factors.

For example, a software company has a different revenue model and different value-determining factors than a manufacturing company or a business services provider. Recurring revenue, customer retention, scalability, and technological developments can carry significant weight for a SaaS company. For a manufacturing company, factors such as production capacity, capital expenditures, raw material prices, and dependence on suppliers may be important.

An advisor with knowledge of your industry is better able to place these factors in the proper context.

Therefore, ask: Has the firm previously valued companies in my industry? And can it provide examples of specific industry knowledge that played a role in the valuation?

3. Does the firm have experience with the reason for the valuation?

It’s not just the industry, but also the purpose of the valuation that determines what expertise you need.

For example, a valuation for the sale of a company requires a different focus than a valuation for the introduction of an employee stock ownership plan. In the case of an MBI or MBO, different interests and financing issues come into play.

Specialized experience is also important in the event of a dispute among shareholders. In such cases, the valuation must not only be well-founded from a financial perspective but must also take into account the specific circumstances and interests of the parties involved.

Therefore, choose a firm that has experience with the type of valuation issue for which you are engaging its services.

Ask: How many similar engagements has the firm completed? And what role did the valuation play in the final process?

4. Does the firm have experience with companies of a similar size?

Valuing a company with five employees and revenue in the range of a few million requires a different approach than that used for an international company with multiple locations, complex financing structures, and dozens of shareholders.

The size and complexity of a company influence the analyses required, the amount of information needed, and the depth of the valuation.

It is therefore wise to consider not only industry and transaction experience but also the size of the companies the firm has previously valued.

So ask: Does the firm have experience with companies that are comparable to mine in terms of revenue, number of employees, corporate structure, and complexity?

5. Does the firm operate independently and objectively?

A business valuation must be based on an independent assessment. That may sound obvious, but it is a particularly important consideration in business transactions.

When selling a business, the owner typically wants to achieve the highest possible price. A buyer, on the other hand, takes a critical look at risks and future returns. In employee ownership arrangements, the interests of both existing shareholders and participating employees must be carefully balanced.

A professional valuation expert is not guided by a predetermined desired outcome but substantiates the valuation with relevant information, realistic assumptions, and appropriate valuation methods.

Therefore, ask: How does the agency ensure its independence? And how does it handle potential conflicts of interest?

6. Is the valuation transparent and well-supported?

A valuation report must contain more than just a final figure. You want to understand how the value was determined and what assumptions were used in the process.

Consider the financial data used, future expectations, the assumptions made, the risks, and the valuation methodology chosen.

It must also be clear what information was available and what uncertainties could affect the outcome.

A good appraiser can explain the results in a way that’s easy to understand and is willing to discuss the underlying assumptions with you.

So ask: What kind of report will I receive? Will the assumptions and calculations used be clearly explained? And can I have the valuation explained to other stakeholders as well?

7. Does the firm offer more than just a valuation report?

A business valuation often isn’t a standalone process. The results can lead to follow-up steps, such as a business transfer, a financing application, a management buy-in, or a restructuring of the share capital.

It’s helpful to work with a consultant who not only determines the value but also understands the business and financial implications involved.

That doesn’t mean the valuation firm has to handle all follow-up work itself. However, it is an advantage if the firm has sufficient knowledge and experience to advise you on these matters or has a relevant network of specialists.

So ask: Can the firm also support me with the next steps? And does it have relevant expertise and contacts in the areas of corporate finance, taxation, and legal matters?

8. Is there a personal connection with the advisor?

A business valuation requires trust and effective collaboration. After all, you’ll be sharing sensitive financial and strategic information about your company.

It’s important that you have a good rapport with the advisor carrying out the assignment—someone who listens carefully, asks critical questions, and understands what’s going on within your company.

In addition, the advisor must be able to explain complex financial matters in an understandable way. You don’t have to be a financial specialist yourself to fully understand the results of a valuation.

So ask yourself: Do I trust this person? Are they listening carefully? Is there room for discussion, and are my questions taken seriously?

9. Are the approach, schedule, and costs clear from the start?

Before you award a contract, you want to know what to expect. A professional firm will make it clear in advance what work will be performed, what information is needed, and what kind of report will be delivered.

The costs must also be transparent. The price of a business valuation depends on various factors, including the size and complexity of the business, the availability of financial information, and the purpose of the valuation.

A relatively simple indicative valuation simply requires a different level of investment than a comprehensive independent valuation report for a complex shareholder issue.

Therefore, don’t compare quotes solely on price; instead, focus on the balance between cost, expertise, depth, and the practicality of the report.

So ask: What exactly is included in the quote? Are there any potential additional costs? And what work will be performed to arrive at the final valuation?

10. Can the firm provide relevant references and demonstrate practical experience?

Finally, it is wise to consider a firm’s practical experience and reputation.

Does the firm have demonstrable experience with similar projects? Are there practical examples or references available? And can the firm explain what role the valuation played in previous projects?

Don’t just look at the names of clients, but focus especially on the nature of the assignments. An agency that frequently handles business transfers does not automatically have the same experience with employee participation or complex shareholder issues.

Therefore, ask: Can the firm provide examples of similar valuation assignments? And what was the firm’s added value in those situations?

What does it cost to have a business valuation performed?

The cost of a professional business valuation varies. There is no standard rate, because every business and every valuation request is different.

The main factors that influence the price are: