BVR’s Blake Lyman recently sat down to discuss the state of the business valuation market with Kevin Yeanoplos and Ron Seigneur of Y/S Advisory Services, a consulting firm that provides industry-specific valuation information and advice. As Yeanoplos and Seigneur pointed out, industry knowledge is king in business valuation. Here’s a recap of their discussion.
Yeanoplos: In the business valuation game, you have to know what you don't know otherwise you can have a significant error.
Lyman: I agree. This is especially true in the valuation of specific businesses and business models and their practices. What can you tell business appraisers who tend to lean towards a “one-size fits all” approach to the application of valuation theory?
Yeanoplos: I think if you look at valuation theory as a whole, you’ll find that maybe 75-80 percent of traditional valuation theory applies across the board. It’s that final 20-25 percent that can really be the difference between striking out and hitting a home run. Obviously, someone can get in the ballpark just by chance, but if you want your business valuation to be as precise as possible, you must understand the nuances of each valuation.
Lyman: Can you give our readers a few examples of the nuances that fall into that elusive 20-25 percent category?
Yeanoplos: Auto dealers is certainly one of the areas where there are nuances and an area where I have probably fielded more calls over the past 10 years than any other industry. Health care is another area where there are some very, very tricky nuances that you need to understand. Physician compensation, for instance, is one such example.
Many times the business valuation practitioner simply doesn't know that they don't know. And that really gets back to the exposure that we're talking about. The benefit of working with a firm like ours is akin to having a built in valuation insurance policy. If I'm a practitioner, I want to present the most technically competent, accurate business valuation product that I can to minimize my exposure. We help our clients achieve that goal.
Lyman: Sometimes the right decision is to decline an engagement in stances where your industry knowledge isn’t a match for the task at hand. Can you tell us a little bit about how firms can learn when to say “no”?
Seigneur: Sure. While we definitely help business valuation firms get into new niches and expand their offerings, sometimes there's a need to help when simply know when to say "no." The reality is that sometimes you are just not quite ready to take on a specialty engagement. Maybe it’s a complex health care situation or maybe it's a complex litigation situation that you're just not quite suited for. In those situations we can help our clients vet the decision of whether an engagement suits them, if you will. There's a lot of work out there, but taking on work that you are not suited for can to be risky in and of itself. We help our clients identify those situations.
Lyman: What other services does your firm provide in the areas of practice management and growth initiatives?
Seigneur: We do believe there's an opportunity on an ancillary basis to offer practice management expertise and guidance to other business valuation providers. I do a fair amount of consulting that leverages my experience as a law firm administrator. For instance, I do a lot of retreat facilitation for law firms, but I've also done them for accounting firms and architectural and engineering firms. If a CPA firm is considering the launch of a new valuation and litigation section, we can get the players together for a strategic facilitated discussion that will help them understand what would be involved in adding or expanding that type of capability within a firm. Such forums can help them arrive at the right decision about firm expansion.
For more information on Y/S Advisory Services through BVResources, visit: www.bvresources.com/ysadvisory