[...]... May I?’’ game they are the 10 Dispelling Perceptions about Value captain, and humanly different at that! No one human can be predicted even to run the same company the same way as another would Where, then, is comparability? Comparable value is an appraisal term, and I maintain that business valuators are not really a part of that fine organization called the appraisal society True, business valuators... should always appraise real estate as a stand-alone value, because it can often be sold with or without the business and because real estate ownership usually comprises the most valuable of business assets It can also be the asset least affected in its value under the ‘‘hammer’’ of liquidation and can be the most viable asset pledged as collateral in terms of financing or refinancing the business as a whole... what part of value is tangible (hard assets) and what part of value is intangible (goodwill, as defined by the IRS) While touchable assets connote rather Internal and External Forces 19 straightforward values, intangible values by their namesakes are less easily discerned This is where quasi scientific formulas come into play In one respect we could say that all cash flow equals total value as its essence... direct say in how the company is run Stockholders of the closely held company have all the say in how the company is run, because individuals are quite regularly one and the same as management and because they often are the company 4 Stocks of the public company can fall separately under the influence of supply and demand, titillated and interwoven with other company stock offerings, and broadly influenced... real estate values are not add-ons to business values predicted through cash flow analysis Cash flow value determinants predict what ‘‘can’’ be paid for the real estate, but not ‘‘what’’ the real estate is worth in market terms Market values of real estate and other hard assets collectively can enhance or negate the values of the business as a whole When cash flows will not support the purchase of hard... private agendas, and valuation specialists are no more or less acceptable to the players than are accountants and lawyers The closely held arena is filled with I-wantto-gain motivations (often quite rigid individual motivations of both buyers and sellers), and third-party advice is frequently considered no more 6 Setting the Stage valuable in negotiations than the contents of a baby’s messy diaper What... of using comparable sale data, that an appraiser’s perception won’t be an issue in evaluation In the case of home, machinery, furniture, and many other appraised items, this is certainly a valid defense in an upswinging economy However, homes, machines, furniture, and so on are abundantly traded and have distinct stand-alone values that are more determined by ‘‘wear and tear’’ than by the mind-sets... baby out with the wash water.’’ As you will learn, how small companies can be financed affects estimated prices Beyond the art form, price estimates are also molded by their restricting terms The information technology era has brought about a need for a change in mind-set—not formulas for valuation tactics The breathless overconfidence of observers, investors, and founders alike led to mass failure for. .. ‘‘technically’’ find reason to disagree with this statement specifically when small companies acquire other small businesses, both reacting as entities But this transaction is rare in the arena where most small -company transfers occur Stock of the closely held company has no ‘‘free-floating’’ or market value that is detached from the value of tangible and intangible assets held by the company itself Management... occasionally about the use of financial tables, as many expert technicians also do Formulas, like languages, if not used daily can cause even the competent mind to wander and fail periodically Try reading the 846 pages in Handbook of Financial Mathematics, Formulas and Tables by Robert P Vichas (Prentice-Hall), if you doubt my concerns over formula usage! My point: Mastering DCF methodology is beyond the reach . Production and Retail Sales) 13 7 Chapter 16 Retail Hardware Stores 15 8 Chapter 17 Retail Garden Center 17 0 Chapter 18 Grocery Store 18 8 Chapter 19 Manufacturer with Mail-Order Sales 204 vi Contents Chapter. 12 Small Manufacturer Valuation (With Ratio Studies) 87 Chapter 13 Valuation of a Restaurant 10 7 Chapter 14 Seventy Cents on the Dollar 12 4 Chapter 15 Retail Home-Decorating Business Valuation (With. a business that was sold at arm’s length). This book is a companion to A Basic Guide for Buying and Selling a Company. And as with its companion, that ‘‘rascal’’ perception must be equally handled.