How Do I Value My Appraisal Business?

[Dave Smith]

Hi all:

My retirement plan is actually in motion. My house is for sale and I have a buyer for my business. Now, how do I appraise my appraisal business or is that a conflict of interest? I know I can’t be objective because I want a mountain of coyote pelts for it. Is there any hard data out there that will help me scale back my “blue sky” desire to a more realistic level.

Some background:

I have a one person operation… me, myself and I. I have a large number of clients due to the nature of this tourist area, as over 70% of all the properties are owned by non residents. I get a lot of calls for work from out of town banks, attorneys and other clients. During the past twenty years I have appraised a LOT of properties several times, some of them as many as six or seven times.

I have a loyal client base, with about two thirds of my work being done for half a dozen lenders. They are not anxious to see me retire because they don’t have any good options as to who to call for appraisals once I am gone. They have told me that if I can locate a good replacement appraiser or two they will be delighted to use them.

I have been approached by a very reputable out of area appraisal firm that wants to take over my entire business. They are willing to rent my office from me. They want me to stay for a year after my house sells as a consultant for the two appraisers that would come in. Both appraisers have twenty years experience so I would not be a trainer other than to assist them in becoming knowledgeable about this market area. All my historical and reference data will stay. I will have total access to all my reports for the five years I need to have access to them.

With all that as background how do we figure out the business value? If anyone reading this plea for help has truly meaningful information on valuing an appraisal business please send me a private message with any information you can give me. Forum comments will also be very appreciated.

Are there any meaningful income multipliers for this situation? Have you appraised an appraisal business? Have you bought one or sold one? Do you know of any apprasial businesses that are for sale? Help! Help! Help! I want to play "Take This Job and Shove It" every time a bad AMC or mortgage broker calls with stupid demands.

Moderators: Please move this post to the jobs board if that is a more appropriate place for it.

Thanks in advance for any help sent my way.

 

[Farm Gal]

There are some good books on the subject, but it is hard to establish a clear pic on your own biz, even useing formulary methods...

OR Contact a biz appraiser... ask around of the divorce sharks... they know who the 'good ones' are <_<

One of my friends has a full and recent set of biz analysis/appraisal literature .. let me know if you want them, they reconciled... but boy did she get eduacated :blink: .

I surely would want to read 'em so I could with reasonable assurance anaylze any report I got presented ...

 

[Sheikh Yerbouti]

Try the ASA website: appraisers.org. You should be able to find a business valuation member within a reasonable distance. Also, there is an article in the current AI magazine Valuation Insights.

Dave McReynolds

 

[Leon Stewart]

AI's Valuation Magazine (the latest issue) indicates that it should be 100% of the Annual Gross Income if a Payment Plan is used. If it's a Cash Deal it should be 50 to 65% of the Gross Income, but in your case you have to negiotate a Salary if you are to stay on for a year, but I would try to sell it out right, get your money and leave. There is one thing about selling a "personal service Business" where the Clients aren't under contract, they can leave when the person who they have had a good working relationship with over the years is no longer there. That's why it's so difficult to sell one of these types of businesses, there is no way the seller can guarantee that the Clients will stay on with the purchaser, and for how long. You have to realize that the Client might not like the new owners work, and whatever they paid for the business would be down the drain.

leon

 

[Bill Rose]

Private service businesses are sold every day. If the product is a service, include six months of orientation, rather than just toss him/her the key. That way your clients won't be left high and dry and you can transition the relationship with goodwill. Help the buyer be successful. It can only help you in the long run. Just my way of thinking.

 

[Bill Rose]

Oh, by the way....average the adjusted annual income in the last three years and multiply it by 1.5 for approximate price.

 

[Mike Garrett RAA]

I recommend you hire a business appraiser and consult a business broker who is very familiar with service businesses. A unique part of this business is continuing liability...what about that?

 

[Fred Carter]

Mike Garrett's comment prompts me to add 2 cents worth: Be sure you don't cancel your E&O coverage (assuming you carry it) too soon. An appraisal you did last year may generate a claim next year. Assuming the coverage is on a "claims made" basis, you need to have your coverage in force when the claim is reported, not when the alleged wrongful act took place.

 

[Doug in NC]

All I can say is Congratulations Dave! I just took a long weekend off, it was really nice. Having every day off might get boring eventually, but I look forward to the challenge. I could think of a lot of things I would like to do if I had a lot more free time.

I realized the other day that the reason I don't like to work in the yard anymore is because it wastes my free time. Most of us become so wrapped up in our careers that life has a way of quickly passing us by.

 

[Ross Pinkepank]

Knowing what you know, how much would you be willing to pay to buy your business? How long will it take to "pay off" that amount?