How do you know if a business valuation professional knows what they’re doing? While professional certifications aren’t required to perform business valuations, choosing an analyst with at least one business valuation designation is a good way to ensure you’re working with a trained professional.
Here in the U.S., three different organizations offer credentials in business valuation. The requirements for the different credentials are more similar than they are different. All three require a college degree or equivalent; specialized education in business valuation; a passing score on a rigorous exam; work experience; and ongoing continuing professional education. Submission of a case study or a sanitized version of an actual client business valuation report may also be required. Where they differ is chiefly in the number of hours of required education and the need for professional experience. Let’s take a look at these organizations and the credentials they offer.
American Society of Appraisers
The American Society of Appraisers offers the Accredited Senior Appraiser (ASA) and Accredited Member (AM) certifications, which differ in the amount of professional experience required: the ASA requires five years of appraisal experience, while the AM designation requires only two years. Business valuation is just one of several areas that an ASA or AM may specialize in — real property, machinery, gems and jewelry, and personal property are also available as specialties. Therefore, make sure that the ASA or AM you work with specializes in business valuation.
This organization has perhaps the most rigorous requirements, as all candidates must also first complete a 15-hour course with an exam covering Uniform Standards of Professional Appraisal Practice (USPAP). In addition, candidates must complete 101 hours of coursework in general appraisal principles and their chosen specialty. Candidates must also submit a client report as part of their application packet. After passing all qualifications, appraisers must complete 40 hours of continuing education in appraisal plus seven hours of USPAP courses every five years.
American Institute of Certified Public Accountants (AICPA)
The AICPA is mostly known for overseeing professional standards and practice for CPAs, but also offers the Accredited in Business Valuation (ABV) credential. Until recently, candidates for the ABV designation had to also be CPAs, but in August of 2018, the AICPA decided to allow non-CPAs to also qualify for this credential.
Coursework for the exam requires about 75 hours. Candidates must also complete 150 hours of valuation work or six valuation engagements to become certified. Unlike the other two organizations, the AICPA does not require candidates to submit a case study or client report — they just need to pass the exam. After certification, 60 hours of continuing professional education in business valuation is required every three years.
National Association of Certified Valuators and Analysts (NACVA)
NACVA offers the Certified Valuation Analyst (CVA). Coursework for the exam usually requires 45 hours, and a case study or client report must also be submitted for review.
Candidates who are also CPAs or Chartered Accountants (CA) are not required to have any additional work experience, while those who do not have either of those designations must demonstrate “substantial” experience with business valuation.
This “substantial” experience can be achieved through a combination of work experience with business valuation, performing 10 or more valuations, or demonstrating mastery of business valuation through writing or graduate level studies. Every three years, analysts are required to complete either 36 hours of NACVA recommended continuing professional education or 60 hours of other coursework.
Cross-certification is common
Because the knowledge and experience base for credentials for these three organizations has considerable overlap, each organization has pathways to streamline the accreditation process for holders of the other credentials.
For example, NACVA allows holders of the ABV or ASA credential to waive the experience requirement, although they still must pass the CVA exam and submit a case study. Holders of the ABV credential can bypass the education and exams required for the ASA, but must still submit a case study and complete the USPAP requirements. Likewise, ASA credential holders can bypass the AICPA’s education and exam requirements for the ABV.
Relevant experience is vital
The education and work requirements for these credentials are similar, differing primarily in quantity. Therefore, after making sure you choose a professional with at least one of these designations, relevant experience is the most important criteria to look for. Selecting an analyst who has experience with similar businesses is optimal. However, if that’s not possible, it’s prudent to choose an analyst with a depth and breadth of experience across many types of businesses and with the many different situations that require a business valuation.