A friend was teasing me about business valuation, claiming that we appraisers “adjust the numbers [meaning historical financial statements] so much that the [performance of the] business is unrecognizable.”
For once in my life, I came back fast with the right response: “You have it precisely backwards! Historical financial statements may already have so many [...]
A business appraisal is a systematic determination of the value of a business interest. The word “systematic” conjures a very helpful (at least to me) analogy. A system consists of inputs, throughputs, and outputs. Inputs are what go in, throughputs are intermediate results, and outputs are concluded results. Appraisal inputs are [...]
I really appreciate and look forward to the questions and comments you provide regarding my posts! They point out my errors, give me new information, suggest topics that need better explanation, give me new information and insights, and often are food for my own thought and learning.
Regarding the Justification of Purchase (JOP) test, a [...]
All of us run into bottlenecks in our work. A bottleneck is an obstacle to getting the job done. There are two sources of bottlenecks: others and you!
Bottlenecks due to others arise when you are waiting for their approval of your engagement, data, review of your draft, or maybe for meeting, deposition, or [...]
In the last and some previous posts, I referred to “buy-a-job” businesses. By that, I meant businesses that generate at least fair market compensation for their owner-managers and adequately service all debt, but do not (necessarily) generate cash flows to equity that yield much of a return on investment.
Buy-a-job businesses are not just small [...]
This post reviews the Justification of Purchase (JOP) Test, on which I receive many questions from readers and students.
The JOP tests whether a concluded value is reasonable. Note first that the “concluded value” is the value of 100% of the common stock of a business. As described here, it cannot be used to [...]
