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Settle Cases by Leveraging Your Financial Expert's Skills
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by: bizvals121
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Word Count: 453
Mediators and litigators take note. Value is seldom ever a single number. It
is a range on a continuum as of a particular point in time.
Gold holds its same properties regardless of timeframe, so what causes the
price of this precious metal to change from year-to-year, day-to-day and even
hour-to-hour? The fact is that investors are not simply looking at gold, but the
market overall and making judgments as to the stability of investments in
everything from currency to debt (bonds) and equity (stocks).
Often it makes sense to examine a business in the context of an amalgamation
of assets and liabilities as well as people, processes, place and period and how
this impacts the two primary areas a BV expert is compensated to defend: level
of risk and economic benefit.
Let’s briefly examine each in the context of a quantifying risk. How much
time has the BV expert expended looking at who are the key personnel, what are
their backgrounds and health? What are present staffing levels and tenure as
compared to its industry and market(s)? What impact does the current market have
on retention? How much have staffs’ efforts been key to the current growth and
profitability of the business? What would occur if one or more of these
individuals were to depart or had a rocky marriage or failing health? Since
management and key personnel are often relevant to the success of most
businesses and funding sources almost always begin examining these issues, it
makes sense the BV expert has to do so as well.
This becomes germane when examining level of compensation and existence of
buy-sell, employee agreements and by laws as well as the existence of a
transition plan and insurance coverage. Each of these issues will ultimately be
quantified by the BV expert in the form of a discount rate. If two owners had
similar annual revenues, but one was 35 and had been in operation for five years
and the other was 55 and in operation for 30 years, some relevant assumptions
could be made as to continuity and future performance.
If it is understood, the real trick to a quality result is quantifying
intangible assets’ values, then this begins by addressing what these assets are
and how they’re leveraged to achieve results. What are these results? Simply put
they are the benefits achieved measured by amount of business and value growth
and the level of earnings that can be paid out that would not adversely impact
future company performance.
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* Valuation Discounts, Business Appraiser
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