Arbitration of Valuation Disputes
I often get phone calls from business owners and attorneys requesting that I briefly look at a business and write a letter giving my opinion as to the value of a business. My answer is always the same. Because of the professional standards that I must follow as a CVA, I can't do it. The only way I can give an opinion as to the value of a business is to follow the steps and standards dictated by the National Association of Certified Valuation Analysts. This means two things. First, by following the professional standards, the valuation report will produce a well thought out and hopefully accurate valuation of the business. Second, because the process is comprehensive, it will not be inexpensive.
What if the business is small and probably not worth much?
The traditional litigation path usually consists of:
So what can parties disputing the value of a small business do when they reach an impasse? One option is for the parties to submit to mediation an/or arbitration with a qualified business valuation professional.
As an arbitrator, the business valuation professional can informally
gather information, meet with the parties and come up with a value of the
business without having to comply with the expensive professional standards
required to issue a formal business valuation opinion.
Aren't the parties taking a chance that this short-cut process might produce an inaccurate valuation decision?
Yes, but when the value of a business is small (under $100,000 in my
opinion) and it is not financially practical to follow the traditional
litigation route, arbitration by a well qualified valuation expert may
be a better and less costly alternative than continuing the dispute or
going to court and asking a judge to make a valuation decision based on
Arbitration of valuation disputes can be useful in the following situations:
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