The Single Appraiser, Select Now and Value Now buy-sell agreement valuation process is the one I recommend for most successful closely held and family businesses. I prefer this single appraiser process as the best available alternative for fixed-price, formula, and multiple appraiser agreements.
In the Single Appraiser, Select Now and Value Now, the appraiser is not only named in the agreement, but he or she is engaged to provide an initial appraisal for purposes of the agreement.
The Single Appraiser, Select Now and Value Now process provides several distinct advantages relative to other process agreements, including:
One further element can improve the Single Appraiser, Select Now and Value Now option even more – regular reappraisals. In my opinion, most companies with substantial value (beginning at $2 to $3 million of value) should have an annual revaluation for their agreements. For most such companies, the cost of the appraisal process is insignificant relative to the certainty provided by maintaining the pricing provisions on a current basis. Owners who view the cost of an annual reappraisal as excessive should have the reappraisals every other year.
Additional benefits from annual or periodic reappraisal for buy-sell agreements include:
In all cases, if the most current appraisal is more than a specified amount of time old, then the agreements should provide for a reappraisal upon the occurrence of a trigger event.
This form of single appraiser process is, based on my experience over some 30 years, the most reasonable valuation process for most closely held and family businesses.