Hii everyone,
I am new here and find lot of knwoledge here. I want to know how much effort need to be a successfull business valuator.??
Thnks…
Business valuation field is good. But initially it requires a lot of efforts in understanding the basics. For getting perfection best thing is to join bigger group like http://investmentbank.com/process/ and find opportunities to learn all the basics. Be in one company for longer time, as this will help you to know the ABC of the company and with time you’ll become perfect in your work.
When deciding to sell your business, it’s important to have an understanding what your business is worth as you enter the M&A process. Five common business valuation methods assist you in figuring out your business’s value.
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Asset Valuation
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Historical Earnings Valuation
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Relative Valuation
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Future Maintainable Earnings Valuation
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Discount Cash Flow Valuation
Vonga and Diesel hit it out of the park… I worked in BV for a while, here’s mine:
Downside: A lot of valuation firms are sweatshops… they hire juniors at $70-80K + bonus to do the tedious work of valuations-- adjusting clients’ financials, finding good comps for Income and Market methods, and report writing/editing… there is time pressure to crank valuations out start-to-finish in about 20 hours… it’s less finance, and more cookbook valuation, so it basically covers a reading or two in Level 2/Equity. The only professional judgement needed is selecting comps, a discount rate and a DLOM. Also, price points for valuations have come down with firms like SVB outsourcing work to India. The BV industry is fractured among three professional orgs, ASA, ABV, and CVA… ASA is the most respected, CPA’s mostly get the ABV, CVA is for anyone who passes the exam. At BV conferences people get really worked up about cost of capital and liquidity discounts, but in practice it’s usually a SWAG.
Upside: Finding a niche you like could be professionally rewarding-- private firm valuation (RR-59/60), fair value reporting (ASC-820), or stock option expense (409A). I found the latter interesting using BSOPM to value pre-IPO startups needing to value stock options expense. Some BV’s go to middle-market M&A after a few years or perhaps starts their own BV shop.
https://www.analystforum.com/forums/cfa-forums/cfa-general-discussion/91055742?page=1
I found that diesel’s comments in that thread are dead on.
Very interesting thread. I’m wondering if any of you who work in valuation can talk a little about the pressures you feel from clients who want a certain outcome. I’m an industry CPA and have worked on a few acquisitions from both sides (acquiring and getting acquired).
When my former employer was acquired I couldn’t believe the Purchase Price Allocation. The actual revenue generating assets stayed at the previous book values plus just a tiny bit. The newly created intangibles were given nominal values, and a ridiculous amount of goodwill was created. This allocation had no basis in economic reality but was the outcome the parent company wanted. Pure speculation, but I presume the valuation firm knew what the client wanted and they wanted to be hired again for the next job. Is this sort of thing an edge case, or is it just how it is? (three years later all of the goodwill created in this deal was written down to zero)
I have been in BV > 25 years. The work is fascinating, esp. the on-site interviews with key executives. From the get-go in the early 1990s, my major focus has been on unsystematic risk (USR). CAPM assumes away the existence of USR by positing that rational investors hold fully-diversified portfolios. That’s all well and good, but it doesn’t apply to a business owner who’s apt to have upwards of 90% of her/his net worth tied up in the illiquid equity of the company that s/he owns.
Because of the absence of any coherent approach to gauging USR, I wrote a book in 2010 entitled ‘Value Maps’ (it’s on Amazon here: http://bit.ly/ValueMaps). Based on data from more than 600 engagements, I’m now in the process of doing an update of my approach to quantifying USR. I will self-publish on Amazon late this year. If you would like to be notified when the booklet is available, please email me at: cfa2005@gmail.com. I’ll let you know when it comes out. Beause I am self-publishing, it will be very affordable.
My focus on USR enables me to help owners increase the value of their equity stake by reducing USR. That’s faster, easier, and more likely to succeed than trying to increase value through either acquisitions or rapid growth; both of those have risk oozing from every pore.
Warren Miller, CPA, CFA
Lexington, Virginia