The August BVU (subscription required) featured an interview with Sean R. Saari (Skoda Minotti). Recently, Saari published an article, “Developing Supportable Attrition Rates in Customer Relationship Valuations,” in NACVA’s QuickRead.

Historical rates: The article points out that the analysis of historical attrition rates to estimate future customer attrition is the method that is often the most supportable. However, it’s also the most time-consuming of the methods typically used. Also, its use is “predicated on the company having kept detailed historical sales data.”

The simplest method in estimating attrition is to rely on a qualitative estimate from management. However, this is the least supportable to auditors, “who may have difficulty relying on the estimate without a corroborating quantitative analysis (unless such quantitative data is not available),” writes Saari. Another method is to see whether any of the guideline public companies analyzed have made acquisitions. If they have, they must disclose the useful lives assigned to the acquired customer relationships, so it may be possible to back into an attrition rate.