✈ June 28, 2017, Avicor Aviation Inc.
So you have decided that it might be good idea to know what the value of your aviation business is. Maybe you are considering selling. Maybe there is someone that wants to buy in to the business or a partner is looking to divest their ownership share. Perhaps you are seeking a loan or line of credit to establish the business. Whatever the reason that you are considering it, here are five questions you should ask before you have someone carry out the valuation.
Aviation is a "bird of a different feather." Unlike many other industries, its economic cycles are not always closely matched with the general economy. Aviation also frequently involves people who are extremely passionate about what they do. Understanding the ups and downs of the industry (no pun intended) and what affects the level of activity in the various sectors of aviation is important in assessing the value of an aviation company. If the valuator does not understand the dynamics of the aviation industry, the company's value may be inadvertently skewed. So ask about their experience in aviation.
The FAA, EASA, MOT...depending on where an aviation business is located and services, and the sectors in which it operates, there are a number of regulatory agencies that can affect an aviation business. Relationships with these agencies and staying on top of regulatory changes are an important factor in smooth operation. Not staying on top of these things can quickly impede value. Whether the business is a worldwide charter operator or a local flight school, a repair station servicing local piston aircraft, or a jet manufacturer, regulatory relationships, certifications and authorizations all have value. It is important that the valuator understand these aspects of an aviation business. Ask the valuator about their understanding of the regulatory environment that your aviation business operates in.
And speaking of certification, does the valuator have the necessary certification to carry out the valuation. For example, if the numbers generated by the valuation will be used with respect to any filings with the IRS, the valuation must be carried out by someone with the proper certifications. Ask the valuator what certification they have.
Seriously, if you don't understand the report when you read it, you won't be very convinced that the valuator has determined the right value for your business. And if the intended audience (potential purchaser, loan officer, IRS...) doesn't understand the process the valuator went through in making that determination, they won't be comfortable with it either. Listen to what the valuator is saying---are they speaking in layman's terms? Does it make sense to you? Ask about what kinds of explanations they put into their report.
It's always good to know what kind of experience others have had with the valuator. Were they easy to work with? Did they maintain confidentiality during thee process if it was needed? Were things completed in a timely manner? And you can also ask if the report was readable from others that have used the valuator's services.
It's a process to have your aviation business valued. Asking a few questions up front can help you make the right decision about who should be valuing your company.
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