Using templates in business valuation is key to producing a quality report. Most if not all valuation analysts use templates to create and write their reports and many of those templates consist of Word and Excel files that are linked together.
Benefits from using templates
There are many reasons to use templates to help prepare valuation reports. First, a template encourages repeatability and efficiency. As long as the template is comprehensive and it has the flexibility to cover multiple situations, using a set template allows you to perform valuations that are thorough and complete on a consistent basis. These templates act as a blueprint for the valuation, promoting a process to help the valuation analyst. Templates can also provide complex schedules to the valuation analyst without having to create them from scratch.
Templates for the narrative portion of reports and templates for exhibits also help to prevent errors if they are linked together. Linking allows for a seamless flow of data between the two templates. The linking also allows for corrections to take place throughout the edit process with minimal effort required for each revision. This foundation for the report ensures that the report and schedules have a consistent look throughout the individual report and across all reports within the valuation department. This consistency increases the quality and professionalism of the valuation work products.
Finally, the use of templates helps to decrease costs. The time that the valuation analyst would spend creating exhibits and reports can add up; however, having a structure already built for the valuation is very cost-effective. This also allows the analyst to spend more time on the valuation issues rather than building the presentation of schedules.
Drawbacks from using templates
Although templates can be very helpful, most templates only cover basic situations. Since most valuation reports are not very simple, customization of the templates is frequently needed. It would be impossible to build a template that covers every single different situation in business valuation because of the potential complexity of all of the issues. Because of this, templates must be thorough but also allow for flexibility.
Another drawback from using templates is that the valuation analyst must not get too comfortable with the template. Because the art and science of valuation is always evolving, the report and the exhibits must be updated on a recurring basis. This encompasses updating information based on yearly research materials. Additionally, when templates are created, they must be reviewed very carefully. One small error can have catastrophic consequences throughout the report and will be carried through to each and every report until the error is corrected.
Templates are very helpful to the valuation analyst but should be used only with the knowledge of the benefits and limitations that such templates can provide.
By Henry & Horne