Business Valuation

[Stephen J. Vertin MAI]

I hold the MRICS with an emphasis in machinery and equipment. The Royal Institute has a number of courses in both machinery and equipment and business valuation. The RICS is much older than ASA, further the organization is international. This year the ASA, RICS and American Institute of Certified Public Accountants (AICPA) came together to develop a Certification in Entity and Intangible Valuations or CEIV. The credential was designed to enhance consistency and transparency in the fair value measurement process. The CEIV credential was designed to address fair value measurements for businesses, business interests, intangible assets, certain liabilities, and inventory for financial reporting purposes.

Both business and personalty valuation are the Wild-West of valuation. If you do not believe me believe A Business Enterprise Value, Anthology; Second Edition, which clearly states: “There are divergent methods of estimating business enterprise value and no single technique is universally accepted”.

If appraisers cannot agree on the correct method of valuing a hotel-motel, controversy in many other areas surely exist. The number of articles on hotel-motel valuation related to business enterprise approach verse the Rushmore approach are numerous. There have been court cases hedged on proper methodology. These organizations are trying to unify proper methodology to install public trust. You should look into the CEIV. It is my opinion these initials are most likely the future. So much so I am putting my money where my mouth is and sitting for the examine in April 2018. Again, this is cutting edge stuff and has only been around for about a year.

 

[Terrel L. Shields]

Both business and personalty valuation are the Wild-West of valuation. If you do not believe me believe A Business Enterprise Value, Anthology; Second Edition, which clearly states: “There are divergent methods of estimating business enterprise value and no single technique is universally accepted”.

Lennhoff v. Rushmore... classic
https://www.hvs.com/staticcontent/l.../separatingbusiness-aiwebinar-rushmorehvs.pdf

 

[Michael P Jacobs MAI]

I think perhaps most appraisers are trained to be more precise, and expect more precision from themselves, than business evaluators, even considering that our profession is to a great extent "art." While it may seem that an accounting approach is more empirical, as has been pointed out intangible valuation methodology is not well defined.

This becomes something of a barrier to entry for the typical real estate appraiser, who can't begin to map out a solution to the appraisal problem in their own mind.

The fact is that most business valuations are not a commodity service like much of real estate appraisal has become. There is a lot more data available for a real estate appraisal, and appraisers all pretty much agree on the valuation methodology. The same can't be said for business evaluators.

Hospitality, convenience stores and gas stations are within our grasp because there is much more data for these business evaluations. But when we get to something more specialized, and there is no data or definitive methodology for many of the variables, we real estate appraisers tend to go limbic.

Real estate appraisers who feel a calling toward business valuation should go for it. Just have an open mind to a different industry standard for precision.

 

[PL1957]

I think perhaps most appraisers are trained to be more precise, and expect more precision from themselves, than business evaluators, even considering that our profession is to a great extent "art." While it may seem that an accounting approach is more empirical, as has been pointed out intangible valuation methodology is not well defined.

This becomes something of a barrier to entry for the typical real estate appraiser, who can't begin to map out a solution to the appraisal problem in their own mind.

The fact is that most business valuations are not a commodity service like much of real estate appraisal has become. There is a lot more data available for a real estate appraisal, and appraisers all pretty much agree on the valuation methodology. The same can't be said for business evaluators.

Hospitality, convenience stores and gas stations are within our grasp because there is much more data for these business evaluations. But when we get to something more specialized, and there is no data or definitive methodology for many of the variables, we real estate appraisers tend to go limbic.

Real estate appraisers who feel a calling toward business valuation should go for it. Just have an open mind to a different industry standard for precision.

I think it would be a good idea to require a basic BV class as part of CG education. It would help give appraisers a wider worldview.

 

[WestMichiganCG]

I called up a business valuation specialist with a good reputation in our community. I asked about their certifications and they are ASA certified and recommended that. I was looking for another way to diversify our business. Business valuation has some components of the income approach in the fact that if a company produces "X" amount of profit every year, the business is worth "X" times a multiplier depending on the business. My acquaintance at this business said they have a database that has an approximate $60,000 annual cost. I look into the business valuation side of golf courses and C-stores but forward on any business valuation requests that go beyond these two businesses. If I had a business to sell, I would be looking for a CPA with an ASA license and would steer clear of appraisers without those certifications.