Throughout the years, business valuations have been prepared by individuals with varying degrees of experience and, for that matter, varying professional backgrounds. Most professionals performing valuations had a background in accounting or business, but until fairly recently, credentials designating either courses taken or on-the-job experience in the valuation industry simply weren’t used.
The past 25 years, though, have brought a flurry of three-letter acronyms to the business valuation industry.
The first widely accepted credential for business valuation, the Certified Business Appraiser (CBA), was organized and developed by the Institute of Business Appraisers (IBA) in 1978. To obtain a CBA designation, an individual has to pass a six-hour written examination and submit two business appraisal reports for review. The written exam, however, may be waived for applicants who hold one or more of the other professional designations for business valuation. Applicants also must attend 90 hours of upper-level classroom work or have five years of full-time experience in the business valuation field.
A few years later, the IBA added the Accredited by IBA (AIBA) credential. This was developed primarily to provide an entry into the field for those who either did not have two reports to submit for review or wished to obtain more business valuation education before becoming a candidate for the CBA designation. To achieve the AIBA designation, an individual must attend an eight-day workshop, complete all assignments, pass a written examination at the conclusion of the workshop, submit a completed appraisal for peer review, and pass a character and fitness screening.
With the IBA already in high gear with both the CBA and AIBA credential, the American Society of Appraisers (ASA) jumped into the fray in 1981. (You are keeping all of these acronyms straight, right?)
Since the ASA had been focused on business valuations, real property and personal property appraisals, and gem and jewelry valuations since 1936, it seemed only a matter of time before it too established a professional designation. In fact, the ASA developed two accreditations for business valuation: the Accredited Member (AM) and Accredited Senior Appraiser (ASA).
The ASA offers certifications to individuals who attend the required courses, pass a proctored examination, and submit two reports for review. The only difference between the two designations is the experience requirement: two years for an AM and five years for an ASA.
Not to be outdone, the National Association of Certified Valuation Analysts (NACVA) was organized in 1990 and, the following year, developed its first credential: the Certified Valuation Analyst (CVA). Despite being the youngest of all organizations offering business valuation credentials, NACVA has the most members (approximately 4,800).
NACVA’s size, in fact, may be attributed to its innovative approach in providing valuable education, support, and services to business appraisers. NACVA awards its CVA designation to individuals who attend a five-day training program, pass a four-hour proctored examination, and submit a case study for review. In addition, the individual must hold a valid CPA certificate.
In 1999, NACVA developed yet another credential, the Accredited Valuation Analyst (AVA). The AVA is available to those who are not CPAs, but have a degree in a business-related field. All other requirements for the AVA are similar to those of the CVA.
Since many business valuation professionals were CPAs anyway, it only seemed a matter of time before the American Institute of Certified Public Accountants (AICPA) entered the valuation credential arena. In 1997, the AICPA developed the Accredited Business Appraiser (ABV) designation. To become an ABV, an individual has to be a CPA and pass an eight-hour written examination. Additionally, the candidate must be able to demonstrate experience in ten valuation engagements.
There won’t be a test, but, as you can see, business valuation credentials can get pretty confusing. These four organizations collectively issue seven different designations, all of which are commonly seen and generally accepted in the valuation field. There are at least 15 other designations related to the valuation field.
So the million dollar question is, with all of these designations, how do you know which ones to look for when you are having a business valuation prepared?
There is, of course, no right answer to that question. (That would be too easy.) All of the designations referenced herein are given by respected organizations that, in addition to having rigorous credentialing requirements, also require continuing education credits. In addition, all require a college degree or, in the case of the IBA and ASA designations, the equivalent of a college degree. All but the AICPA have their own set of standards to which the members must adhere.
The bottom line is to be exercise appropriate due diligence. If you are looking for someone to handle a business valuation, make sure that they have one of these credentials. Just as important, make certain they possess the experience your are looking for in the field of business valuations, as well as the personal attributes you desire not just in a business valuator, but in your dealings with any business professional.
As a general rule of thumb, a business valuator must be detail-oriented, but able to look beyond the numbers to anticipate what effect external and internal forces will have on a business. Of equal importance is the valuator’s ability to communicate his or her findings through both a written report, and oral testimony, if required.
Finally, you can always check out the latest in professional standards and credentialing by contacting the four primary professional organizations in the field. These organizations can be reached via their websites: ASA: http://www.appraisers.org/; IBA: http://www.go-iba.org/; NACVA: http://www.nacva.com/; and AICPA: http://www.aicpa.org/index.htm

Claudia Wolter, along with Joel Charkatz and James Sandkuhler are Certified Valuation Analysts (CVA) with the accounting and consulting firm KAWG&F. For more information or a complimentary copy of Business Valuations From A To Z, contact them at 410-828-6432 or email Joel at jcharkatz@kawgf.com.