Many people are defined by the amount of compensation they receive. Therefore, doing normalization adjustments during a valuation engagement can be a very sensitive issue.
What to do: Inform clients early that you may have to normalize pay, advises Stephen Kirkland (Atlantic Executive Consulting Group LLC). Kirkland is a compensation expert who works with valuation experts on compensation issues. Speaking at the recent NACVA conference in Las Vegas, he also suggests that you put a paragraph in your engagement letter stating that you will be reviewing owner compensation and may make normalization adjustments.
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