Should you assume your clients are totally clueless?

BVWireIssue #198-1
March 6, 2019

valuation method
calculation of value, calculation report, valuation report

Amid the ongoing debate over the use of calculation reports (see prior coverage), the author of the original article that sparked the discussion made an intriguing point. In his experience, clients are astute enough about business valuation to know what factors influence the outcome. The implication is that you need to be alert to the possibility of management’s attempts to steer you into a valuation it sees as more favorable. The author feels that calculation engagements amplify this risk.

Watch out: Authors of a rebuttal article say the notion that the average client knows enough about valuation to be able to manipulate the results is “preposterous” and “ridiculous.” Some would have a problem with this response, feeling that the expert should not assume the client has absolutely no idea as to what factors may influence a valuation. You don’t have to be a genius to realize that higher management projections mean higher value. True, clients won’t understand all of the nuances of valuation, but don’t underestimate their intelligence. In the interest of the profession’s increased focus on “professional skepticism,” you must be more diligent than ever in verifying any information management gives you.

Both articles are available from BVR as a free download titled “Calculation Report Controversy.”

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