We’ve been in the valuation and related advisory business for a long time.
My valuation firm, Alteris LLC has had a huge variety of clients, everything from venture-backed startups to major institutions to national governments.
We also work with privately held businesses in the lower middle market. Often this is some of the most rewarding and gratifying work we do. It’s very rewarding to see the positive effect we can have on the lives of our clients and their families.
Alteris LLC always endeavors to uphold the highest ethical standards and treat our clients in the best way possible. We don’t cut corners. We don’t suggest work that the client does not need. It’s just wrong to do otherwise. We have enough clients and other business that we do not have to engage in such behavior. The high road is always the best way to go.
Of course, we work in a competitive industry. Sometimes we encounter other firms that do not embrace this ethical philosophy.
For example – Here’s some valuation “scams” that we occasionally see.
The valuation firm offers to complete a valuation for an almost unbelievably low fee. The firm is almost certainly losing money on the project.
But wait. They offer to charge for other work to accompany the valuation project. Work that needs to be done anyway. Often work that the company can do by itself.
This other work could cost high fees for simply inputting data. We’ve actually seen that from an accounting firm.
The client thinks that the valuation charge is appropriate (though low) and does not take into account the additional high cost of completing the simple task.
Here’s another. The work on the low-cost valuation project begins and – amazingly – a change in scope is required! Fees must go up. Of course, no one could have known that this additional work is needed beforehand!
Or an astonishingly low fee is charged for the valuation work if the client transfers their tax work over to the CPA firm. Then the CPA firm overcharges for the tax work. If the client paid a market price for the valuation and the tax work, the overall fee would be much less.
These scams basically use the same tactic. It splits up fees to make the client think they are getting a bargain. They aren’t.
Unfortunately, these tactics are usually used against the smaller, lower-middle-market family businesses that can ill afford to overpay for these services.
If you are a client be aware of these tactics. Splitting fees among various services. Expensive services you may not need or could just do yourself. Scope changes (bait and switch) and others. You should know exactly what you are paying for and what you are getting beforehand.
