Early in his career, Ted Williams struck out. Furiously cursing, he returned to the dugout. A teammate asked what pitch got him. Williams said it was a curveball. His teammate then asked “What do you think he’ll throw you next time?” Williams paused … he had never thought about pitching to Ted Williams … and from then on he studied pitchers relentlessly.
We appraisers should study our clients just as relentlessly! The best way to do this is to listen carefully to what they say, file the information in our mental databases, and use it to improve how we present and explain our abilities and conclusions. I have been doing this for almost 25 years, and have come to appreciate that clients (business owners, buyers and sellers) often see things VERY differently than we do. In many cases they make incorrect assumptions. We need to be alert for them, and to educate clients accordingly.
Without further ado, here are my “Top 10 Client Incorrect Assumptions” about business appraisal and appraisers:
Value is what I want / need it to be.
- Value is a single number, regardless of circumstances or purpose.
- If selling, I will be fully paid at closing for synergy. If buying, I will pay nothing for it at any time.
- The appraiser is “on my side” (i.e., not objective).
- Valuations use simple formulas like book value or multiples of earnings.
- My CPA can do valuations.
- “Goodwill” always has value; I (the seller) should be paid for it.
- “Potential” always has value; I (the seller) should be paid for it.
- Goodwill is part of the business and fully, easily transferable to the buyer.
- The other party to the transaction will accept the appraisal without challenge.
- Valuations do not cost much.
Can you add to my list?