An important part of performing a business valuation is performing a site visit. The site visit allows a valuator to have a firsthand opportunity to learn about the business operations and enhances understanding of the operations, the condition of fixed assets and the overall strengths and weaknesses of the business that may have an effect on the value. Also, the site visit helps provide context of the financial data the valuator has analyzed in a preliminary analysis to the operations of the business that are observed through the site visit.
Additionally, site visits allow the valuator to confirm the physical existence of the business and the business assets. Viewing the assets can help the valuator determine if an appraisal is needed for specific assets which could dramatically change the value of the business due to the condition of fixed assets and other assets owned by the business.
Although there are costs associated with a valuator performing a site visit, it is beneficial for the valuator in understanding the business operations and could potentially change the value of the business from what the value would have been if no site visit was performed. The site visit and management interview can be completed by the valuator at the same time to provide more efficiency for the process of a business valuation.
Another important part of performing a business valuation if performing a management interview. The management interview helps the valuator understand the history of the business, management’s perspective on the business operations in relation to the industry, factors that may influence future operating results, and help fill in any gaps on financial data that arise from any preliminary analysis.
The valuator should always end the management interview with the question “Is there any other information that has not been covered which may have an effect on the value of the business?” This allows the valuator to protect their valuation from material omissions as it puts the burden of relevant information onto management.