To look to the future of the BV profession, we must explore the relevant dynamics within the industry. That starts with looking to our past to see what events and milestones brought us to where we are today, followed by ascertaining the economic and demographic trends leading us into the future, and culminating with identifying those trends which will have the greatest impact upon the profession. NACVA set ...

(Part III of IV) Part one of this four-part series discussed the unit principle of property appraisal. Part two discussed the methods of economic obsolescence measurement. This third part recommends best practices responses to the most typical assessment authority objections for economic obsolescence measurements. Introduction Valuation analysts (“analysts”) are often asked to develop value for complex indu ...

(Part II of IV) The first of this four-part series considered the differences between the unit principle of property appraisal and the summation principle of property appraisal. This second part describes and illustrates the generally accepted economic obsolescence measurement methods (with particular emphasis on the capitalization of income loss method). Introduction Valuation analysis (“analysts”) are oft ...

(Part I of IV) Valuation analysts (“analysts”) are often asked to value special-purpose industrial and commercial property. These analyses may be developed for various purposes, including taxation purposes. This discussion focuses on the identification and measurement of economic obsolescence in the application of the cost approach to value such special-purpose property. This topic is particularly relevant ...

A Synopsis of Valuation Brief 1 “Understanding the Differences: Conclusion of Value vs. Value Calculations” Valuation Brief 1, “Understanding the Differences: Conclusion of Value vs. Value Calculations” attempts to unpack the differences between that which is a conclusion of value and that which is not. In this 14th article of the unimpeachable neutrality series, the author provides a synopsis of the key ta ...

Tread Carefully Using this Market-Approach In valuation theory, the market-based approach, being one of the three main valuation approaches, can rely on the guideline private comparable transactions method, suggesting that the results obtained in that way should be treated equally with other valuation approaches and methods. However, the disadvantages of the guideline private comparable transactions method ...

Understanding the Fundamentals of the Industry The purpose of this article is to give other experts facing the challenge of completing a valuation of a Bitcoin mining facility some of the fundamental characteristics needed to understand the operations and assign value. A few months back I received a call from a potential client looking for a valuation of bitcoin mining company for purposes of a prenuptial a ...

A Minimalist’s Suggestion on How to Lose the Boilerplate What level of detail should valuation analysts include in a detailed report? In this article, the author shares six practices he follows to answer the above question. You probably remember that college professor who said they graded term papers by throwing them down the stairs and giving the ones the farthest down the highest grade. This is how I feel ...

New Year, Neutrality It is incumbent upon those who attempt to become or remain as “thought leaders” to sometimes put some thought into what is written. This said, this 13th article of the Unimpeachable Neutrality Series will cover some of the basics of what exactly “unimpeachable neutrality” is and how it is just as valuable and necessary in 2023. I received a phone call from a distressed member the other ...

To Turn Worthy Dreams into Valuable Legacies This article features an interview where, Nataliya Kalava, CVA, ABV, MAFF, of American Valuations, interviewed Brian Stephens, MBA, CMAP, CVA, CBI, CEPA, of Legacy Business Sales and Acquisitions. Brian’s mission is to inspire and empower great people to turn worthy dreams into valuable legacies. During this conversation, the authors of this article discuss the m ...

Of a Real Estate Centered Entity As business valuation analysts, how many of us have ever agreed to value an equity interest in a gas station, or a hotel, or some other business that operates with real estate as an operating asset? For me, that answer is “frequently.” Yet, over the years my view of how to undertake this type of assignment has changed. These types of businesses deserve more care and understa ...

(Part III of III) Part one of this three-part series presented the description of Clary Hood, Inc. (“CHI”) and the description of the tax litigation concluded in the Hood decision. Part two of this series summarized the Tax Court’s analysis and conclusions regarding the reasonableness of executive compensation issues in this matter. This third and final discussion summarizes the Tax Court’s analysis and con ...

(Part II of III) Part one of this three-part series summarized the facts regarding Clary Hood, Inc. (“CHI”) and the basis for the litigation. This second article focuses on the Tax Court’s analysis of the reasonableness of compensation issue in the Hood decision. Introduction The U.S. Tax Court decision in Clary Hood, Inc. v. Commissioner[1] provides important practical guidance to private companies and to ...

(Part I of III) This article about excess compensation is comprised of three-parts. Part one summarizes the facts regarding Clary Hood, Inc. v. Commissioner and the U.S. Tax Court’s holding. Part two of this series describes the Tax Court’s analysis and conclusions regarding the reasonableness of compensation issues. Part three describes the Tax Court’s analysis and conclusions regarding Section 6662 penalt ...

It is all Based on Your Perspective The purchase price of a transaction can look vastly different. Therefore, when considering the prices of various transactions, it is important to know how those prices have been calculated so that one has a consistent perspective and is not comparing apples to oranges This article illustrates the various perspectives that may emerge in connection with a purchase price. Wi ...

VPS StraightTalk Webinar, October 20, 2022 This summer and fall 2022, within the business valuation profession, one of the most contentious issues has been “which cost of capital should business valuation professionals use when valuing a small business?” First, Dr. Damodaran advocated the implied equity risk premium with the capital asset pricing model without adding a size premium or company specific risk. ...

Using Weights and Factors to Quantify Risk This is a condensation of the author’s article, originally published in The Value Examiner, July/August 2022. The author proposes an alternative way of calculating the company specific risk premium. This is a condensation of my article originally published in The Value Examiner, July/August 2022. Most of us who value businesses are not valuing businesses in the mid ...

How the PTE Tax Can Impact the Valuation of Pass-Through Entities This paper explains how the PTE tax in Massachusetts and several other states affects the valuation of a business and how business owners can account for this tax to avoid double taxation. Introduction Taxes can have a significant impact on the value of a business. Pass-through entities such as S-Corporations and partnerships generally do not ...

On Business Valuation The effects of inflation on consumers’ spending and psyche are well-known. The difficulties each causes in day-to-day life are often discussed. Inflation has affected everything from the cost of transportation to the cost of food and housing. What is less discussed, however, is how the current inflationary period is affecting small business owners and their companies. In this article t ...

Alleged Best Practices to Whom? Peter J. Butler, CFA, ASA, MBA, founder of Valtrend, LLC and inventor of the Total Cost of Equity Calculator (TCOE), responds to comments made by Robert Reilly and Connor Thurman regarding best practices used to arrive at the company specific risk; the latter article did not discuss the TCOE and here he “key[s] in on Part III—the section which addresses empirical evidence in ...