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 ...

The Consistency of Data and Trends The real estate sector encompasses a variety of activities, limited only by the imagination, including: selling, leasing, management, development, appraisal, title services, and investment. When valuing businesses linked to the real estate market, whether directly or indirectly, it is essential to examine both the risk and the cash flow generating ability of each company. ...

(Part II of II) There are special tax considerations related to the transfer of S corporation stock at the time of the owner’s death. Therefore, owners of S corporation stock must be intentional with regard to the risks (and the tax costs) associated with an inadvertent termination of the subject entity’s S corporation status. S corporation owners—and analysts—should be aware that many states tax S corporat ...

(Part I of II) Analysts are quick to identify and quantify the implicit and explicit S status economic benefits in the S corporation business valuation. The objective of this discussion is to summarize the offsetting economic risks associated with an S corporation ownership interest. Analysts should be equally aware—and intentionally consider the risks as well as the benefits—of S corporation status in the ...

Identification First! Few articles in the business valuation profession address the identification component of valuing goodwill, particularly personal or professional goodwill in the context of matrimonial dissolution matters. Current literature provides valuation professionals with techniques regarding the quantification or valuation exercise (e.g., cost approach, discounted cash flow, relief from royalty ...

Conclusory Conclusions and Opinionated Opinions Tests of Time While there is usually more than one reason that something bad occurs, it is often standard setters or practitioners that are rightfully or wrongfully accused of actions or inactions that may or do have a detrimental impact on an industry, case, business, or even members of a protected class. This twelfth article of the unimpeachable neutrality s ...

Part IV of IV This article is the fourth (Read Part I, Part II, and Part III) and final part of a series related to the development of—and the reporting of—a bankruptcy-related appraisal of debtor company industrial or commercial property. This part considers (1) the valuation synthesis and conclusion process and (2) the reporting of the bankruptcy-related property appraisal. Introduction Property appraisal ...

Part III of IV This four-part article summarizes what valuation specialists in all property appraisal disciplines (herein called “appraisers”), company managements, and their legal counsel need to know about property appraisals prepared within a bankruptcy environment. For purposes of this discussion, the term property includes real estate and real property, tangible personal property, and intangible person ...

Part II of IV This article is part two (read Part I here) of a four-part series related to the bankruptcy-related appraisal of industrial and commercial company real estate and real property, tangible personal property, and intangible personal property. Part one of the series considered all of the reasons why a valuation specialist in any appraisal discipline (herein called an “appraiser”) may be retained t ...

Tax Saving Tips for Small Business Owners This article discusses the recently issued Rev. Proc. 2022-32. The revenue procedure also serves to remind every estate planner that the days of the high lifetime exemption will soon be ending starting in 2025, if not sooner with all the uncertainties in Congress and the economy. The author discusses the merits of gift-giving in light of the potential changes. On Ju ...

Part I of IV This is the first article of a four-part series. This initial article summarizes the generally accepted property appraisal approaches and methods that appraisers typically consider in a bankruptcy-related assignment. This discussion also describes the property appraisal synthesis and conclusion process. Due to the litigious nature of a bankruptcy proceeding, bankruptcy-related property appraisa ...

An Outline for Making Awards Useful and Final (Part III of III) Appraisal is a frequently used and often maligned method to adjudicate disputes in the property insurance world. Typically, appraisal is used for the purposes of evaluation only and will not bring finality to a claim in which coverage, or, in certain jurisdictions, causation is also being disputed. Although the perceived advantages of appraisal ...

Conclusory Conclusions and Opinionated Opinions Tests of Time The current valuation environment tends to be more about supporting the conclusion of value based upon the chosen approach and methodology with consideration of all three approach to business valuation far too often involving little more than the analyst placing a wet finger in the air and saying “ah yes, a discounted cash flow.” This eleventh ar ...

An Outline for Making Awards Useful and Final (Part II of III) Appraisal is a frequently used and often maligned method to adjudicate disputes in the property insurance world. Typically, appraisal is used for the purposes of evaluation only and will not bring finality to a claim in which coverage, or, in certain jurisdictions, causation is also being disputed. Although the perceived advantages of appraisal ...

Guidelines for Resolving Disputes in First Party Property Insurance Claims (Part I of III) Appraisal is a frequently used and often maligned method to adjudicate disputes in the property insurance world. Typically, appraisal is used for the purposes of evaluation only and will not bring finality to a claim in which coverage, or, in certain jurisdictions, causation is also being disputed. Although the percei ...