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Approaches and Methodologies Considered When Appraising Your Business

BV Specialists

Business owners likely have particular ideas about the value of their company and how best to calculate it, given their experience and knowledge of their financial history, and understanding of the market and industry in which they operate. Market Approach. >The Asset Approach.

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Mercer’s Musings #3: Marketability Discounts Re Two Hypothetical Minority Interests

Chris Mercer

In Mercer’s Musings #2, we discussed the old and cold data on restricted stock transactions that have been misused by appraisers for decades. This conclusion applies to all appraisals, including those prepared for the Internal Revenue Service. In other words, value is a function of expected cash flow, growth, and risk.

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Mercer’s Musings #4: Factors to Consider in Valuing Partial Ownership Interests

Chris Mercer

” And the answer holds regardless of any certifications appraisers might hold. Procedural Guidelines (PG) are designed to provide more detailed guidance for consideration by business appraisers than found in the base standards themselves. The value of the underlying enterprise or asset, if applicable.

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Deja Vu #10: Valuation Theory is the Same for Businesses and Business Interests: V =f(CF, G, and R)

Chris Mercer

Business appraisers routinely use the discounted cash flow model to value entire businesses. The value of all remaining cash flows after the finite forecast period is captured in the terminal value, which is, effectively, a capitalization of earnings or cash flows at the end of the forecast period.

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The 2023 AICPA Business Valuation Conference and One Thought on Valuation Adjustments

Chris Mercer

I have heard many appraisers suggest that one should not normalize owner compensation when valuing minority interests “because the minority shareholder cannot change compensation.” Otherwise, the appraiser is not valuing the appropriate asset. The present value based on these assumptions is $11.65

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Fair Market Value and the Nonexistent Marketability Discount for Controlling Interests

Chris Mercer

Fair Market Value Defined Fair market value occurs at the intersection of hypothetical negotiations between hypothetical willing, knowledgeable and able buyers and sellers. Therefore, in every fair market value determination prepared by business appraisers, it is critical that both buyers and sellers are present for the negotiation.

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How to Value an SME—An Introductory Guide

Valutico

SMEs can present challenges with DCF due to limited historical financial data, unreliable information, inadequate financial forecasts, and difficulty in determining terminal value. Another approach is comparing it to similar businesses that have been sold recently, similar to how real estate is appraised.