Most of the time, when we receive inquiries about our services from gatekeepers (attorneys, accountants and other professionals who refer business to us), the caller gives us background on the purpose and use of the appraisal. This, plus a few more questions on our part, lets us establish the engagement parameters (standard and premise of value, valuation date, level of value of the subject interest). This usually allows us to quote a fee (range) with reasonable confidence. If we can ask a few more questions about the subject business and get good answers, we may even be able to figure out which approaches and methods we will probably use, and be able to quote a fee (range) with extremely high confidence.
Here’s an example. I just got an email from an attorney who “has a client with an established FLP who has been making annual exclusion gifts of limited partnership interests for several years. She would now like to contribute additional limited interests to a {grantor} trust. The FLP owns publicly traded securities and real estate {with a current, independently appraised value}.
Based on this information, I know I will use the Asset Approach in my appraisal, and just have to determine the discounts. I know the precise information I need and can quote an exact fee. No problem!
Contrast the above with a “cold” inquiry: you answer the phone and the person just asks “I need my business valued, how much will it cost?” How do you respond?
First of all, be polite. You never know who might be calling…the chances are it involves a very small business, but every once in awhile it might be a really big fish!
Second, tell the caller you need some information to determine exactly what you need to do for the person so that you can estimate the fee. Ask if they have just a few minutes to answer a few questions, and tell them everything is, of course, going to be kept confidential. Then inquire as to why they need the appraisal, and go from there. If the engagement sounds like a good one, see if you can arrange to meet with them personally (on a no-obligation, confidential basis) to explore further how you can be of service. This is probably not necessary for an FLP type valuation, but is obviously essential for an operating business; I have found that when I go to visit them, I usually get the business right then and also do my management interview all in one step!