Applying Business Basics to Grow a Valuation Practice

May 20th 2015
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For most accountants, the madness of busy season is by now a fading memory. For those firms that strive to drive consistent revenue year-round, spring is the time to transition from compliance to consultant mode to ensure a steady stream of clients.

By tapping into a firm’s specializations, such as valuation services, your staff is able to meet the needs of existing clients while providing a specialized service that can grow your business. Valuation experts who leverage consulting to sell their services have greater flexibility and thus greater opportunity to sell to a more diverse set of clients. Taking a consultative approach means not just becoming a trusted advisor to business owners, but also increasing opportunities to make a sale.

A recent survey of business valuation professionals illustrated this point, showing that 55 percent of surveyed valuation professionals would describe their services as consultation rather than execution. This shift has been seen throughout the accounting world, as software like TurboTax has disrupted what previously was many accountants’ bread and butter.

Demand for business valuation services continues to flourish, creating an opportunity to turn one-time engagements into ongoing valuation commitments. Valuation practices should start to feel like the performance dashboard for existing clients. Valuation experts who know the inside of a business’s financials can diagnose issues and help business owners reduce risk.

Regardless of the type of engagement in this specialty, partners should keep two important pieces of the valuation practice in mind as it generates more of a firm’s overall revenue: quality control and efficiency.

Quality Control
The importance of quality control may sound obvious, but it extends beyond preparing a superior report and analysis for a client. It’s critical to a growing line of business, as well as your firm’s reputation.

According to the American Institute of CPAs (AICPA), a major source of errors in final valuation reports are the spreadsheet templates used for financial analysis and calculations. It can be a time-consuming process to alter the templates for a specific engagement, and furthermore, errors multiply when spreadsheets are often passed from analyst to analyst. Oversight from leadership becomes critical, but it can be time-consuming.

One advantage of using an automated technology solution is that relevant information from the subject company and industry comparisons can be imported quickly into a standard, customized format. Errors can be minimized, yet valuation experts can maintain flexibility to determine the appropriate value.

Another component of quality control in business valuation engagements is the amounts of time senior valuation analysts have available to review the final product – both from a technical standpoint and an editorial one. It is ideal to have staff with the most experience with valuations spend more time on due diligence and analysis than their man-hours on more administrative portions of the business valuation. Not only does your firm have a responsibility to produce high-quality engagements for the client, but your firm’s reputation and future business relies on the quality of the work. Automating some of the basic, administrative aspects of valuations can help provide time-savings that can then be applied to higher-value, more strategic tasks.

Because business valuation engagements are often quoted as a flat fee, rather than the hourly billing of other accounting work, efficiencies can more directly affect your firm’s bottom line. Adding to the previous point on utilizing senior staff’s time effectively, creating efficiencies in your firm’s available process is paramount to allowing their time to be spent on analysis and not admin.

The most efficient tools used in business valuations are those that are flexible enough that the analyst can incorporate his or her own expertise and years of experience into the process. Software can do the “heavy lifting,” while valuation experts can focus on forming their opinions of a business’s value.

In addition to relying on automated systems, delegating less-challenging aspects of the valuations to lower-level staff members can also help create efficiencies and build a more scaleable business valuation practice.

“Leveraging work down to lower-level staff members has benefits, such as (1) minimizing fees, which can be a competitive advantage, and (2) developing an experienced team, which will help the practice grow,” according to the AICPA’s Toolkit. A streamlined process for developing valuation analyses and reports means the practice may have more latitude in its cost structure to provide a competitive bid on the engagement.

By focusing on quality control and efficiency within your valuation practice, your firm will be poised to generate revenue all year long. For additional tips on building and maintaining a successful business valuation practice, download the Sageworks whitepaper.

About the author:
Brad Spence is director of the Valuation Solution at Sageworks, which is changing the way CPAs and financial institutions perform valuation engagements. Spence also serves as the director of enterprise sales for the accounting market. He has more than 15 years of leadership experience and holds an M.B.A. from the College of William & Mary.

Related article:

Why Your Firm’s Next Niche Should be Business Valuation


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