What Can the Site Visit Tell Me That’s Not Already in the Numbers?

Demystifying Valuation, Economic Damages + Forensic Accounting

One of the most important parts of a good business valuation is viewing the facilities in which a company operates and speaking at length with those most involved in the management of the business.  The primary objective of the site visit is to gain a broader perspective of the business and its operations and identify current and potential changes that might cause the Company’s future to differ from that indicated by historical financial data.

Typically the site visit should happen early on in the valuation process, after the analyst has obtained and reviewed the preliminary information provided by the Client.  The following are important areas the analyst should cover during the site visit.

  • Company Background – It’s important to know when the Company was formed, for what purpose, and what may have changed since its inception. 
  • Description of the Business Prior to the site visit the analyst should have a good idea of what the Company does, however having a one on one conversation with those who run the business will often provide the most realistic picture of the Company.
  • Management – The analyst should assess the competency of management and the breadth and depth of management skills. 
  • Financial Statements – Discussing the historical financial statements during the site visit can help identify expenses not necessary to the operations of the business (i.e. charitable donations or excessive compensation to the owners).  In valuing a controlling interest these types of expenses would need to be removed. 
  • Operations – The analyst can glean valuable information by inspecting the operations of a company.  He or she can observe firsthand just how efficiently and effectively operations are carried out. 
  • Interview of Outsiders – It may be helpful to interview parties outside the management circle.  There may be professionals related to the Company such as attorneys, the Client’s CPA and auditors, and bankers with information relevant to the valuation. 

For more details on the importance of the site visit in business valuation, see my article here.

Cindy Andresen