Business valuation services

My practice is mostly based around tax preparation services and outsourced CFO work. A potential client called me yesterday explaining that she wants to buy a local franchise and she was provided with prior three years of tax returns. The returns are schedule C so I assume the owner is either sole proprietor or LLC. She needs someone to review these and determine if the asking price of $350k is reasonable, low, high, etc...

Is there anything to be aware of in terms of professional standards or liability? I am not registered for peer review but I don't believe this falls into assurance category, and I don't think this would require any type of report.

I'm a CPA/ABV. Good credentials for business valuation professionals include the ASA, CFA, and ABV. CFA is overkill, and not many CFAs do the valuation work your client would need. ASA is really the gold standard, which stands for Accredited Senior Appraiser given by the American Society of Appraisers. ASAs need a minimum of 5 years of full time valuation experience along with competency tests, work review, and educational requirements.

For a business that's going for 350k, you could charge around $3,000-$5000 for a quality valuation job. But you should know what you're doing. You're representing the buyer and doing some due diligence and coming up with your own valuation. You will need to be able to support your findings, and have proof that you are competent enough to perform the job up to professional standards. Call your insurer and let them know you may be doing valuation work to see how much extra they would want.

My concern is that I've never done business valuation and therefore don't really know what I'm doing. Obviously I'm very hesitant to take on this work. I assume there is much more needed than three years of tax returns. Probably bank statements, invoices, credit reports, etc...to help verify the data.

If you don't know what you need to do, there's really three options.

1) Farm it out and put it on your letterhead
2) Pass on the project
3) Learn what's involved regarding business valuations. AICPA sells lots of materials on the subject.

In situations like this a recommend that my clients use a 3rd party business valuation service. I have a valuation service that I have used many times over the years. In addition I work with the valuation service providing them needed financials and tax returns.
I bill my clients for my time in assisting the valuation service.