It’s all too common: Business owners order a valuation, are ticked with the results, and decide to get a second opinion. Often, it’s not logic driving that decision. It’s ego. If you order a business valuation from an accredited appraiser, you should never need to invest in a second opinion.
I’ve written several posts now on valuations with the input of Darren Mize, an Accredited Senior Appraiser with GCF Valuation, Inc. Each time, he tells me that business owners almost always overvalue their company’s worth. They use oversimplified calculations to appraise their company with little to no data to support it.
Then, when a credible business valuation reveals their company’s actual value, they’re not ready to hear the reality or truth. But rather than admitting any inaccuracies on their end, they conclude the appraiser must have missed the mark, and scurry for a second opinion.
Here are five reasons why Darren says you should resist the urge to seek a second opinion on your valuation - even if you’re unhappy with the results.
5 Reasons to Avoid Getting a Second Opinion Valuation
If money isn’t a concern and you’re losing sleep over your initial valuation results, then Darren’s advice is to go ahead and get a second opinion. It doesn’t make it the right decision per se, but if a second opinion is what you need to ease your nerves, knock yourself out.
Just because you can order a second valuation doesn’t mean you should. Provided you solicit a credible business valuation, Darren said you should never need a second opinion for the following reasons:
1. Appraisers are unbiased experts - We understand how disheartening it can be to discover your business is worth less than you expected. You pour your heart and soul into your company, and want to see the hard work pay off.
However, in many ways, that emotional attachment can manipulate your valuation if you try to conduct it yourself.
Accredited appraisers, on the other hand, are not invested in your company. They’re unbiased experts who can pinpoint specific variables to present an accurate appraisal. If you have any questions about their findings, they should be able to answer them in a way that’s easy to understand.
2. You should trust accreditation - Every accredited appraiser must follow a strict, uniform process to determine your company’s value. While three accredited appraisers might not come back with the exact same numbers, they’ll be pretty darn close.
Therefore, as long as your appraiser is accredited in conducting business valuations, you should trust their results. They’re the facts, whether you like them or not.
3. Drastically different results are a red flag - If a second opinion gives a drastically different value, it likely means one of the two valuations wasn’t generated by an accredited appraiser. If they had, you wouldn’t be getting two completely different numbers.
Always make sure your first valuation comes from an accredited appraiser. If they lack the necessary accreditation, don’t work with them. Sure, their results might make you happier. But any buyer will see through an unsound, inaccurate valuation.
4. Valuations are cost-prohibitive - The most in-depth accredited valuations can run up to $25,000. Even if your valuation costs substantially less, it’s really not worth paying any amount of money to find out what you already know.
5. You can always test the waters by trying to sell - The ultimate test of a valuation’s accuracy is to go out and try to sell your company. If you think your business is worth more than your valued appraisal, put it on the market at that price. If it’s overpriced, it probably won’t get any action.
Provided you get an accredited valuation, trust it. If the value is lower than you expected, don’t waste time, money and effort on a second opinion. Instead, accept the facts, and follow the benchmarks to improve your business and increase its true value.