BV in the current economy: Is specialization required?

BVWireIssue #86-4
November 18, 2009

“You can’t be all things to all people,” Jim Andersen said at this week’s AICPA National Business Valuation Conference in San Francisco. “Don’t dabble in stuff.  Whatever you do—do it well.”  He divides the growth market for BV services into four categories, each with their own strengths and potential problems:

  • Valuation for litigation. Marital dissolutions, dissenting shareholder and partnership disputes, economic damages and eminent domain proceedings: These are less fee-sensitive that traditional commodity work. But litigation can be tough on your schedule—and collecting fees particularly for divorce work can sometimes be a problem.
  • Fair value for financial reporting. Purchase price allocations, impairment analyses, 409A and 123R valuations: all good work that requires specialized training.  Most of the work is currently going to the larger firms. But if you get the work you may get two “cracks” at it—the actual 141 or 157 engagement and then the review of your report by the auditors’ firms. Fair value work is very DCF oriented, Andersen says, requiring “lots of assumptions”—and he cautions against the high exposure for liability. 
  • Business succession planning. Nearly every commentator is predicting a boom in this area as deferred baby boomer wealth transfers begin to occur.  This is “very emotionally rewarding work” that is perfect for the general practitioner with ten to twenty years experience, who can act as “financial facilitator” for families in transition. Consulting opportunities include traditional M&A planning; “key employee” internal transfers; next generation family transfer and estate planning; and buy-sell valuations.
  • Traditional commodity-driven valuations. Estate and gift, ESOPs, etc., are still presenting development opportunities—but you need to pick one or two and “do lots” to make money, Andersen says. “It gets tough, from a realization standpoint—and I might get 65% or 70% of my ‘normal’ rates for ‘filler’ stuff.”

Develop a marketing plan and consider hiring a PR consultant to help you realize it. In particular, business succession planning is “low hanging fruit” as baby boomers retire and the economy improves; for these tips and best practice techniques, see the January 2009 Business Valuation Update™.

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