When all else fails, use a forward-looking approach to valuation

Keith Prescott addressed this question in last week’s BVR webinar Valuing Construction Companies. While his thoughts are particularly relevant to the hard-hit AEC market, they should be recalled in any valuation where volatility is pronounced. “The forward-looking approach will probably be the most valid given the current economic environment and in the near future,” said Prescott.  “This approach makes the management interview extremely important.” Prescott advises appraisers to look at the subject company’s backlog, the marketing plan that's in place, and industry and economic forecasts. “We're probably not going to have as high a degree of confidence as we've had in the past, and that's why this whole process becomes much more valuable and much more touchy,” he added.

For more information on the webinar click here.