A 9-point checklist for selecting BV methods, by IBA’s Curtiss

BVWireIssue #111-1
December 7, 2011

“Based on the following facts about a prospective engagement,” says Rand Curtiss (Loveman Curtiss Inc.) in last week’s post to the Institute of Business Appraisers’ (IBA) blog, “what valuation approaches and methods would you use or rule out?”

1. This is a tax-related valuation as of a given date.
2. A minority equity interest is to be valued.
3. The business is a going concern.
4. Its industry is disclosed.
5. There have been no prior transactions in its stock.
6. There is no buy-sell agreement.
7. The company has sales of less than $10 million.
8. It has a small amount of debt (bank loan) with a repayment schedule.
9. There are no atypical facts or circumstances.

“What we are doing is similar to doctors’ differential diagnosis,” Curtiss writes. Based on facts (symptoms) presented by the patient (subject company) and answers to targeted follow-up questions, BV experts can deduce their valuation approaches and conclusions. Read Curtiss’ entire BV “diagnosis” of this particular case—including how he rules out the market- and asset-based methods and applies the income approach, with certain key assumptions—at the “Go-IBA” blog. Applied to future cases, Curtiss’ checklist may help appraisers “confidently to quote a fee and turnaround schedule and document our reasoning in our report.”

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