The New Business Reference Guide and Rules of Thumb

Now in its 33rd edition, the Business Reference Guide (BRG) is a treasure trove of information, but the most valuable information in the book for business appraisers is the coverage of pricing rules of thumb for almost 700 types of businesses. These rules of thumb summarize a number of key data points that you will need when developing a top-notch valuation report such as:

• Comments and insights from industry experts;
• Industry trends, data, and surveys;
• Lists of industry resources such as associations, publications, and websites; and
• Industry multiple summary data from DealStats.

The BRG also has an online version with a fully searchable database that includes the print version of the guide. Take a look at a sample outcome from this powerful tool here.

Rules of thumb should generally not be relied on as a primary appraisal method. Therefore, valuation analysts should typically use rules of thumb only as a check to corroborate a value conclusion achieved via other methods. However, if there are valuation rules of thumb for an industry, especially if they are widely recognized, they can be useful to estimate a ballpark range of value. Despite all the caveats about using rules of thumb in pricing businesses, they are commonly used to do just that. If used properly, rules of thumb can come close to what the business will ultimately sell for.

Rules of thumb are also useful for validating historical financials, which is particularly important when valuing cash-intensive businesses. 

These rules of thumb can make your valuation that much easier. Get your copy of the Business Reference Guide, and see how much easier your next valuation report can get!