Valuation Issues from an
DON R. MclVER
In the first edition of Handbook of Business Valuation, I attempted to familiarize the readers—whether they be buyers, sellers, or brokers— with the rational process of arriving at business value. As stated previously, “valuation is not a science.” In this second edition, you will discover many opinions of various professionals on how to determine value. It has been said that one man's trash is another man's treasure. A professional is required to arrive at a value that will maximize his or her clients value and still be reasonable and fair to both parties.
Over the last 50-75 years, the trend in America has been for second and third generations of family-owned businesses not to continue in their parents' business. With no continuation of family members in the business, founders seeking retirement require business valuation and ultimate sale of their enterprise to a younger successor. For each of these opportunities, a ready pool of qualified buyers relish the opportunity to step into a successful operating business.
Much has been written and discussed concerning business valuation in recent years. To the benefit of buyers, sellers, lenders, and other industry professionals, a quality and quantity of valuation information is presently available.
Several years ago, in search of information with which to do an evaluation, I wrote to several leading trade associations requesting literature on that subject, and the typical response was that “no published material existed on valuing closely held companies.” Many books have been written concerning the sale of large publicly traded