I am currently working on developing an alternative method of valuing the controlling equity interests in closely held firms that I term the "marginal benefit method" . This method diverges from the standard income method in these respects: 1. Future economic benefits driving value can be either additional owner employee compensation or free cash flow. 2. The benefit stream is finite. 3. Benefit streams are not converted to lumps sums based on costs of capital derived from public equity markets. 4. Lack of marketability discounts are not applied. Previously published articles have focused on the limitations and problems with the standard income method. I welcome comments on previously published works as well as interest in reviewing drafts on the new valuation methodology outlined above.
Theory and Practice
Owner Employee Compensation is Not Free Cash Flow, Journal of Business Valuation and Economic Loss Analysis (2010)
Owner employees require reasonable compensation for services provided to their companies. It is a major...
The Effect of Sales Terms on Goodwill, Risk and Return in Transfers of Closely Held Accounting Practices, Journal of Business Valuation and Economic Loss Analysis (2010)
Most sale proceeds from accounting practice transfers are allocable to goodwill despite the fact that...
Qualitative Judgments and Consistency in Business Valuation, Journal of Business Valuation and Economic Loss Analysis (2010)
Qualitative judgments are an integral part of business valuation practice. These judgments are often viewed...
There Should Be Little or No Liquidity Discounts for Controlling Interests in Closely Held Businesses, The Value Examiner (2009)
The application of liquidity discounts to the appraised values of controlling interests in closely held...
Investing in a Better Job, The Value Examiner (2008)
Investing time and money to attain "something" that allows a person to earn more in...