The Body of Knowledge—But Not Just for Business Valuation
Business valuation professionals are all familiar with the business valuation body of knowledge. All of the major BV credentialing organizations adhere to the body of knowledge and generally test new potential credentialed members on it. But I want to discuss the overall body of knowledge that a BV analyst should have in performing their services.
We have all heard and read about the advances in technology, especially in the area of artificial intelligence. And we hear and read of the use of technology and models in performing a valuation. Usually somewhere at the end of every such article or webinar is a note that “of course the human element of professional judgment will never be replaced”. While I am a firm believer in that statement, I am also concerned that younger BV professionals might miss the importance of professional judgment.
That begs the question of how can judgement be professional without the professional exercising that judgment having a wide body of knowledge. And that does not just mean the BV body of knowledge, but rather a well-rounded knowledge of business and current events. Of course experience provides a lot of that background, but so does go old fashioned elbow grease.
Even today, at age 77, I probably spend two plus hours a day reading and listening in order to keep up with changes in the business world and changes in current events. The knowledge that I gain helps me to provide that professional judgement that is so important in providing a sound opinion of the value of a business. How does the East Palestine, OH train derailment impact that industry and transportation in general? If I am valuing a business in the oil drilling equipment industry should I not be taking into account the negative decisions of the current administration relative to the oil and gas industry and what effect that likely will have on a business in the oil equipment industry? Yes some of that information is required under the standards as knowledge and research of the industry, but much of it, on a global basis, contributes to the “professional judgement” in arriving at a determination of value.
Certainly some of you might be saying that you cannot spend two hours of each day keeping up to date on the things that contribute to professional judgment, especially if you are under charge hour pressures. However, I believe it is never too young nor too inexperienced to start developing those habits. When I first started in the business world with Arthur Andersen in 1967 my boss, a partner at AA & Co., gave me some very sound advice. He said don’t let a day go by that you do not read the front page of the Wall Street Journal. In today’s information overload world it might not be the WSJ, but my advice is to start your career by spending some part of each day, no matter how small, learning about business and learning about what is going in the world and the country and even in your closer environs. You will not ever regret developing this habit and nurturing it throughout your careers.
Stay up to date on the latest developments in the BVLS field by subscribing to BVLaw. What's your opinion on this case? Let us know by emailing our BVLaw editorial team at firstname.lastname@example.org.