Know Your Worth: Demystifying the “Crystal Ball” of Company Valuation

 In this week’s episode of In Process, our hosts Evelyn Ashley and John Monahon of Trusted Counsel (Ashley), LLC sit down with Michael Blake, the president of Atlanta-based business appraisal and strategic advisory firm Arpeggio Advisors.

“Accountants are in the history business: what’s happening today, what happened yesterday,” explains Blake. “In the appraisal business, we are in the forecasting business. I actually have a crystal ball on my desk—it serves as a reminder of what I do.”

That doesn’t mean that the process itself is simple. Business valuation can be a sensitive process—generally companies are looking into valuation during promising beginnings or high-stakes transitional periods. When you’re in the business of putting a numerical value on entities that often have a hefty amount of emotional and mental capital invested, tensions can run high.

“Nobody likes to be told their baby is ugly,” jokes Blake, referring to how distant the amount owners think their company is worth can be from what the numbers reveal. But the right approach can keep the valuation conversation a rational one. In fact, Blake says that plenty of investment bankers have positive relationships with appraisers because they keep the client thinking logically.

Our hosts moderate the conversation having been an integral part of many valuations and the negotiations that follow. “One of the things we often overcome is that if a company’s getting ready to go out to look for a buyer, the appraisal that they get done will probably be disclosed in diligence,” explains Ashley. “We often have the appraiser come through us, so his or her work is actually attorney-client privileged, and is not producible as part of diligence.”

Listen as Blake discusses what kinds of clients he won’t take on, which key questions he asks during an appraisal, how to approach a buy/sell agreement and how financially solvent companies can retain worth on this episode of In Process.