The Valuation Process

Once Centerpoint Advisors has been retained for an assignment, we establish a new file after receiving a signed Retainer Agreement, a retainer check, and the documents for analysis. Fast completion of a project depends upon prompt receipt of requested information as well as cooperation of others such as the owner and manager of the company, accountant, attorney, and other business advisors. Once we have reviewed the documents and other information that may be requested, we normally schedule a visit to the business to interview management. A draft report can usually be completed within two weeks after the site visit if there are no delays in subsequent requests for additional information.

Reports
While there are three levels of business valuation work according to the ASA Business Valuation Standards, there is one type of report described in BVS-VIII. A Comprehensive Written Business Valuation Report must contain a thorough description of the assignment, characteristics of the interest under appraisal, information collected, analysis performed, the appraisal methods applied, the conclusion, discounts that may apply, and a variety of other factors.

The Uniform Standards of Professional Appraisal Practice of The Appraisal Foundation prescribe two types of reports: Appraisal Report and Restricted Use Report. According to USPAP Standard 10-2, an Appraisal Report presents a full discussion of the information collected, the appraisal process selected, and the analysis used to reach the conclusion. By comparison, a Restricted Use Report is intended for a particular user, so it omits reporting and discussion of some of the data and analysis. For all types of reports, supporting documentation of the data, analysis, and reasoning should be contained in the appraiser's work papers and files.

All reports prepared by Centerpoint Advisors are intended to conform with Uniform Standards of Professional Appraisal Practice and the Standards and ethics of the American Society of Appraisers.

In some situations, a client does not need a comprehensive report with fully supported documentation, but would like expert advice on a specific matter. Analysis and consultation are available on an hourly basis when appropriate.

Fees
The cost of an appraisal assignment or business analysis depends on the amount of work required to reach a logical conclusion that is supported with necessary documentation. While the fee for Calculations regarding a small business can be fairly low, most projects tend to require more work and result in a higher cost. We can quote a single fee for a specific project, or work on an hourly basis for the time necessary to complete the work. Our current billing rates are available on request. Please call our office to discuss a particular assignment.

Document Request
To conduct a business appraisal, the required information can be quite extensive because the appraiser needs to become familiar with many aspects of the business. Items usually required for a comprehensive appraisal are listed below. In some cases, additional information will be requested. Centerpoint Advisors works with clients to develop substitute data if certain items are not available. Clients should send copies of documents, not originals, because the information will be retained in the appraiser’s files.

1. Year-end financial statements for the most recent five years (income statement, balance sheet, statement of cash flows, income tax return)

2. Latest interim period financial statements

3. Annual sales revenue and operating profit for the prior 10 years, or from inception

4. Any financial forecasts for the business

5. Fixed-asset depreciation schedule and aged accounts receivable list, as of the appraisal date

6. Recent appraisals of land, buildings, machinery, trucks and autos, or other major assets
   owned by the business, and a recent list of insured values

7. Brochures and marketing materials describing the company, its products or services

8. Information available from an industry association describing the industry, products/services, growth areas, regulation, problems, outlook, etc.

9. Newspaper or magazine articles on the industry, company, competitors, products, or trends

10. Resumes of senior management team: title, responsibilities, hire date, and organization chart

11. Name of each shareholder, member, or partner, and number of shares or percentage owned

12. Confidential listing of total compensation to each shareholder/Member/partner, and any family members, for each of the past five years: including salary, bonus, commission, pension contribution, consulting payment, etc.

13. Copies of any employment agreements

14. List of any related parties or relatives with whom the company transacts business

15. List of five largest customers by dollar amount, for each of the past three fiscal years

16. List of major suppliers

17. List of key competitors

18. List of each business location address, square footage, and date occupied. Copy of lease if not owned

19. Articles of Incorporation/Organization

20. By-laws of corporation

21. Record of past transactions in ownership interests

22. Copies of any buy/sell agreement, or any other agreements among owners

23. Copies of minutes of Board of Directors meetings, and annual shareholders meetings:
    first meeting, and most recent three meetings

24. Written statement whether an environmental audit has been done for the real property owned or occupied by the business

25. Description of any existing, pending, or potential legal actions involving the company

26. Limited Liability Companies: copy of management agreement / operating agreement

27. Partnerships: copies of all partnership agreements, amendments, and related documents

28. Any other documents or information believed to affect the value of the company