In a recent well-publicized opinion, a high-ranking judge sneered at the business valuation profession’s choice of 1926 as the starting date from which to compile market rate of return data, saying that there was nothing special about that year except it was “when Marilyn Monroe was born.” His implication was that this was a [...]
Most of my valuations are for estate and gift taxes, concern family-owned businesses, and involve gifts or sales to family members of 100%, control and / or minority interests.
Sometimes my clients’ motivations are simply to minimize their estates and the associated estate and gift taxes. This usually happens when the senior generation is well [...]
This post is most definitely a personal opinion that reflects my particular experience and clientele. I am interested in comments as to whether you agree or not with my thoughts!
Although I try as hard as I can to stay current with the technology of business appraisal – how we do things – I have [...]
The title is based on one of my favorite Far Side (RIP) cartoons depicting a guy rising from bed and looking at a wall poster with that as the text. I remember learning this the hard way when I was figuring out how to dress myself 55+ years ago.
How many times have you received [...]
I have had to consider prior transactions in a company’s securities in a large number of recent fair market value-based engagements. As you know, prior transactions, because they are highly visible, attract a great deal of IRS scrutiny and are also quite naturally of great interest to the parties to, for example, a minority [...]
Here are some examples of the sin of being overly precise:
1. A business owner wanted me to express the $5.2 dollar value of his firm as $5,205,156 (using my un-rounded weighted average value conclusion). There were 1 million shares outstanding; the difference in per share value was $5.200 versus $5.205 or less than 0.1%!
2. The highly [...]
In addition to my full-time appraisal practice, I recently took on a new assignment, serving as a part-time instructor at a local university, something I have always wanted to do. This semester I will teach introductory macroeconomics, a survey of the U.S. economy and how it works.
Luckily for me, the course has been taught [...]
If to err is human, boy, am I human! Perhaps you can learn from my most recent error!
I was valuing a business that was owed money by a shareholder. I was asked to assume that the loan receivable was uncollectible and valueless because the debtor was bankrupt. In my financial model, I [...]
The justification of purchase (“JOP”) test requires that the business, if purchased for the indicated amount:
1. Can pay the owner-manager reasonable (fair market) compensation.
2. Can adequately service assumed and acquisition debt.
3. Can earn a satisfactory return on investment. (This applies only to businesses that are not “buy-a-job” entities.)
A colleague called because his JOP test was not working [...]
My last post compared bottom-up and top-down forecasts. This one expands on that comparison. To keep it very simple, let’s focus on forecasting just next year’s revenue for a startup business that has no historical track record. The business is a one-man car detailing service that will charge $100 per car and [...]
