5 questions to answer before picking up the phone

Stop. Before you contact a valuation professional, take the time to answer these questions to streamline the valuation process and avoid unnecessary confusion down the road:

1. Who is actually hiring the valuator? - To take advantage of attorney-client privilege, attorneys sometimes hire the valuator directly. Alternatively, to avoid collection issues, some attorneys request that the client hire the valuator directly.

2. What is being valued? - Although seemingly elementary, identify exactly what you are valuing. Provide the valuator with basic information, such as the company’s name, the type of entity (S corporation, partnership or trust), the current ownership of the company’s stock and the size of the block (number of shares/units or percentage)..

3. What’s the purpose of the valuation? - Valuators are hired for a variety of reasons. Give your expert basic information about the case, as well as any laws or cases that might contain valuation-related information. Also let him or her know whether you are contemplating using the valuation for other purposes.

Generally, valuations are only valid as of a specific date and for a specific purpose. If you let the valuator know your intentions in advance, he or she can tell you whether the value is appropriate for multiple uses.

4. What is the appropriate “as of” date and standard of value? - Often a valuation’s purpose determines its “as of” date and standard of value (fair market value, fair value or strategic value).

5. When do you expect the valuation to be complete? - To avoid frustration, let the valuator know when you expect to receive the report. Additionally, it’s helpful to know up front whether he or she will have the time and staff available to complete your assignment.

It’s perfectly OK if you don’t know the answer to one (or more) of these questions. But discuss any unanswered questions with your expert to ensure the right choice is made. When you’ve set the stage using these guidelines, an organized appraiser should be prepared to ask additional relevant questions, quote you a fee, send you an engagement letter and compile a list of additional information needed to complete your assignment.