The Fair Commission Model for Valuing Goodwill in Small Service Businesses

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Training Event Transcripts
November 7, 2019
Michael Sack Elmaleh, BA, MS, MA, CPA, CVA
goodwill
goodwill, small business valuation, rules of thumb, valuation methods

Summary

Hundreds of thousands of small service businesses are operating in the United States. These include accounting, tax, and bookkeeping practices; barbers and hair stylists; chiropractic, primary care, and dental practices; veterinarians; landscapers, house cleaners, and pool servicers. These businesses are small by virtue of being owned by one or a few owners who, in addition to managing the business, provide personal services directly to their clients, patients, or customers. Specialty brokerage firms often mediate equity transfers of these types of businesses by utilizing well-accepted rules of thumb. Traditional asset, market, and income appraisal methodologies have failed to displace this reliance on rules of thumb in valuing these types of business. Michael Elmaleh introduces an alternative appraisal methodology, the fair commission model, which the presenter believes can provide a more useful and economically realistic way to appraise goodwill in these types of businesses. This model avoids the deficiencies in rules of thumb as well as the more traditional formal models.
The Fair Commission Model for Valuing Goodwill in Small Service Businesses
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