Here is How I Changed my Mindset Asking for a referral may seem egotistical and a bit self-centered, but it is also a good business practice. In this article, Rod Burkert shares two personal obstacles he overcame that kept him from asking for referrals and what changed his mind on this matter. When it comes to building a pipeline of work, referrals are the lifeblood of a BVFLS practice. So why did I feel so awkward asking my clients for them? What was my problem? Turns out there were two. Problem #1 The first problem was my personality. I know…
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Reconsidering the Use of CEFs as a Proxy for DLOC The market pricing of publicly traded closed-end funds based on net asset values is not a reliable proxy for estimating discounts for lack of control for closely held businesses having a portfolio of marketable securities. Despite the acceptance for decades by the highest courts of this valuation method, the author, in this article, sets forth the basis for questioning this established practice. The market pricing of publicly traded closed-end funds (CEFs)1 based on net asset values (NAVs) is not a reliable proxy for estimating discounts for lack of control (DLOC)[1]…
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Operational Finance—A New Way to View your P&L? Have you ever thought about your accounting systems as more than an expense, and how it may benefit you, above and beyond reporting numbers and forms? It can and should be more than an expense. In this article, the author discusses the potential insight gained by tracking the data. Books and records. Bookkeeping. Accounting. Tax returns and quarterly filings. Businessowners typically view these as required administrative duties and consider it an expense. Have you ever thought about your accounting systems as more than an expense, and how it may benefit you, above…
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The Proof is in the Accounting Principles When presenting or rebutting construction claims, there is merit in the forensic accounting adage, “Follow the money trail you will find what happened” The reasonableness and reliability of the construction damages claimed on a project is in the accounting principles. The message in this article is how a forensic accountant can benefit the construction claims process on a construction project through the application of basic accounting principles. When presenting or rebutting construction claims on a construction project, there is merit in the forensic accounting adage, “Follow the money trail and you will find…
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Beyond the 40 Hours of CPE and Embracing Continuous and Mindful Learning The traditional requirement to account for 40 hours of CPE is often viewed as an annual hurdle. This mindset needs to change. This requirement is an opportunity to commit to continuous learning and improvement. In this article, the author identifies the impediments and opportunities to continuous professional and mindful development. [su_pullquote align=”right”]Resources: Consultants’ Training Institute Professional Education [/su_pullquote] In a world that is rapidly changing, company leaders in every industry are being faced with adapting to the trends that redefine the ways in which we conduct business. While…
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Non-Litigation #2 and Litigation #4 The NACVA’s Standards Board was formed to continually review the organizations’ standards and to ensure that the NACVA’s Professional Standards remain up to date, relevant, and relatively consistent with the standards of the other professional organizations. This article addresses the second Non-Litigation and the fourth Litigation FAQ Interpretations published by the NACVA. [su_pullquote align=”right”]Resources: NACVA Professional Standards Standards FAQ Library [/su_pullquote] Business valuation/appraisal standards are promulgated by different business appraisal organizations. The NACVA’s Standards Board was formed to continually review the organizations’ standards and to ensure that the NACVA’s Professional Standards remain up to date,…
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Relative to “Those” Competitors Many BVFLS practitioners have a mind-set that presents a self-made obstacle to successfully marketing their professional services. In this article Rod Burkert shares three reasons he has observed that may explain why we, as professionals, struggle with pricing relative to “those” competitors and suggests ways to address those concerns of losing out on price. I want to go on record that I am not immune to price compression. And if I haven’t said that before, I’m saying it now. But if I’ve been more fortunate than others it’s because, in the years after the Great Recession…
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Changing Assignments from Fairness Opinion to Business Valuation Commercial damages matters can be challenging and require a flexible mind when “wrapping your brain” around the issues and facts of a particular case. Beginning in the first quarter of 2019 and running through October 2020, I had an assignment which began with a simple fairness opinion letter and ended with my testifying at trial to defend my valuation of the business. This article will review the changes in my assignment, the decision to value the business, the Daubert challenge brought by the opposing side, and testifying via Zoom at the trial.…
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The Art of Business Valuation: Accurately Valuing a Small Business This is a book review of The Art of Busines Valuation: Accurately Valuing a Small Business. This book is a guide and desk reference for valuing businesses under $10 million in revenues. The primary question answered in the book is: How do we as business valuators, business brokers, accountants, lawyers, owners, and other interested parties prepare, review, evaluate, or use an accurate business valuation for small and very small businesses in a difficult environment? A business valuation is not just a matter of applying techniques, it has to make sense.…
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(Part IV of IV) This is the final article of the four-part series that sets forth best practices for estimating the company-specific risk premium. This discussion of the series summarizes best practices about the analyst’s conduct of the functional analysis as one component in developing the CSRP estimate. [su_pullquote align=”right”]Resources: Best Practices for Estimating the Company-Specific Risk Premium (Part I of IV) Best Practices for Estimating the Company-Specific Risk Premium (Part II of IV) Best Practices for Estimating the Company-Specific Risk Premium (Part III of IV) [/su_pullquote] Introduction Valuation analysts (analysts) often apply income approach business valuation methods to value…
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Briefing on Criminal Fraud Economic Loss Calculations One of the more exciting and challenging parts of our profession is learning about our judicial system. Professionals whose practice involves economic loss calculations should consider educating themselves on the similarities and differences between “actual” and “intended” losses prior to providing expert testimony or offering an opinion. In my research, I came across a publication titled PRIMER Loss Calculations Under §2B1.1.(b)(1) (United States Sentencing Commission, February 2019). I recommend anyone interested in this topic to take the time to read the publication in detail. The purpose of this QuickRead is to educate interested…
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(Part III of IV) This is the third of a four-part article that sets forth best practices for estimating the company-specific risk premium. This part of the discussion describes the various empirical data sources that analysts may consider as proxies—or benchmarks—or approximations—in developing the CSRP estimate. [su_pullquote align=”right”]Resources: Best Practices for Estimating the Company-Specific Risk Premium (Part I of IV) Best Practices for Estimating the Company-Specific Risk Premium (Part II of IV) [/su_pullquote] Introduction Estimating the cost of capital is one component of private company business valuation performed for financing, transaction, taxation, business planning, financial accounting, litigation, and other purposes.…
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Funding and Planning for Repurchase Obligation and the Use of COLI Understanding the potential detriments of unfunded (or under-funded) repurchase agreements, the ability to put the proper insurance in place to adequately address the financing of retirement benefits for ESOP shareholders has been proven to be a prudent financial decision for many companies. There are many significant benefits to being an employee-owned company. Management must take care to ensure that funding is planned for and available to. One of the purposes of an employee stock ownership plan (ESOP) is to provide retirement benefits to ESOP participants. Because an ESOP holds…
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(Part II of IV) This is the second of a four-part article that sets forth best practices for estimating the company-specific risk premium. The first part of this series summarized where and how the CSRP applies in the various generally accepted cost of capital measurement models. This second part summarizes (1) the concepts of systematic risk and unsystematic risk and (2) the considerations of unsystematic risk in the analyst’s CSRP estimate. [su_pullquote align=”right”]Resources: Best Practices for Estimating the Company-Specific Risk Premium (Part I of IV) [/su_pullquote] Introduction This discussion is the second of a four-part series that summarizes best practices…
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How to Increase Settlement Rates Long before the COVID-19 pandemic, distance mediation was used; however, not extensively and historically, settlement rates were significantly lower than traditional “face-to-face” mediations. With social distancing now in place, mediating by phone and/or video conferencing is getting a closer look. Although the mediation process essentially remains the same for distance mediations, it needs review to determine what is effective and what needs to be reconsidered. There are three key areas that require investigation: technology and equipment, preparation by the mediator as well as the participants, and confidentiality. By tailoring the process for distance mediation, it…
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(Part I of IV) This is a four-part article that sets forth best practices for estimating the company-specific risk premium. The identification and quantification of alpha—or the subject-specific risk component—is sometimes a controversial issue in the private company valuation. This discussion summarizes best practices on what is included in—or should be considered in—the analysis of this Ke alpha component (or unsystematic risk component). These best practices discussion is presented in four parts. The first part of the discussion focuses on the factors that analysts may consider in developing the alpha estimate when selecting a Ke for a private company valuation.…
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A Q&A with Joel Steckel The immediate economic impacts of the COVID-19 pandemic extend beyond their most visible manifestations in the shutting of businesses and the dramatic rise in unemployment. A more subtle consequence that has arisen in the marketplace pertains to companies’ reputations. Brands and the public’s perception of them are impacted not only by a firm’s own actions but also by the actions of other market players. To explore the issues around negative effects on consumers’ brand perception in more depth, Vice President Rene Befurt and Associate Anne Cai spoke with Analysis Group’s academic affiliate Joel Steckel about…
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Rethinking the Role of Your BD Team (Part II of II) In the November 2020 post, an alternative way to structure your firm’s BD efforts that relies less on a central “rainmaker,” and more on an integrated team. In this post, the focus is on how to execute the various activities involved in BD, such as hiring, outsourcing, or cross-training existing staff. For this exercise, do not get hung up on specific titles; in reality, team members’ skills and interests are more important than their titles. Your BD team structure might look something like what is discussed here. Rethinking Activities…
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Business Valuation in a COVID-19 World—Cost of Capital, Growth Rates, and Uncertainties Jim Hitchner, Managing Member of Valuation Products and Services (VPS), unveiled the first of a series of two-hour webinars that targets business valuation and litigation support professionals seeking an intermediate level program. This is a review of the first webinar titled “Business Valuation in a COVID-19 World—Cost of Capital, Growth Rates, and Uncertainties”. This article summarizes the issues discussed during this first webinar. [su_pullquote align=”right”]Resources: Best Practices in Business Valuation—A Practical Approach to Advanced Issues and Applications [/su_pullquote] On October 29, 2020, Jim Hitchner, Managing Member of Valuation…
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Valuation Considerations When PPP Has Been Used The Payroll Protection Program (PPP) is a program established in 2020 by the U.S. Congress entitled the Coronavirus Aid, Relief, and Economic Security Act known as the CARES ACT. This Act, which was in response to the President’s closing of the economy on March 13, 2020, was enacted to assist certain businesses, self-employed, sole proprietors, certain nonprofit organizations, and American Tribal businesses in continuing to pay their employees. In this article, the author addresses how a PPP loan should be treated when the entity is the subject of a valuation. A Little History…