Posted by Jerry Barney

Here are my most recent posts

101 on Minority Discounts

Financial professionals involved with wealth management need to be aware of the effects of court cases relating to valuation of minority interests in small businesses and related securities. Cases brought to the tax court in recent years have shed some light on the relatively obscure subject of discounted values caused by reduced marketability and control [...]

Finding Value In a Business When Cash Flow Is Negative

Can a company have a negative cash flow and still have goodwill value? The answer, maybe surprisingly, is YES! There are three elements that create Going-Concern or Goodwill Value. Not all three need to be present to create the value. They are: Assets in place and ready to use as a going-concern (capital, labor and [...]

Posted by Jerry Barney on Tuesday, September 8th, 2009
Posted in 101
Tags: Business Tips, business valuations

Understanding Intangible Asset Values

Business owners are often not aware of the nuances of intangible asset value. Intangible Assets are comprised of two principal groups both of which can add value: Discrete and Non-Discrete Intangible Assets. Discrete Intangible Assets: are assets which have a legal existence in and of themselves and which may be transferred independently of the business. [...]

Posted by Jerry Barney on Monday, August 3rd, 2009
Posted in 101
Tags: Business Tips, business valuations

Viewing a Business from an Investment Perspective

Whether you are a buyer or a seller, it is important to be able to evaluate a business purely as an investment. There are essentially two kinds of buyers: those who expect active involvement in the business and compensation for their labor, and those who expect to be passive owners, who are looking for a [...]

Posted by Jerry Barney on Thursday, July 2nd, 2009
Posted in 101
Tags: business valuations

Dealing with “Comps” in Business Appraisals

Most everyone has heard the term “comps” as applied to valuation. It means data from comparable sales of businesses. But the data itself is problematic. The most common databases are Pratt’s Stats and BizComps. These sources of data are organized by Standard Industry Codes (SIC). This may seem reasonable, but in fact there is as [...]

Posted by Jerry Barney on Tuesday, June 9th, 2009
Posted in 101
Tags: business valuations

How Declining Revenue Can Affect The Value Of a Business

With the economic upheaval of the past year, many business owners are facing declining revenue. We thought this would be a good time to discuss how shrinking business volume may affect the value of your business. Determinants of Value: The key to preserving value is to preserve Earnings Before Interest, Income Taxes, Depreciation and Amortization [...]

Posted by Jerry Barney on Tuesday, June 2nd, 2009
Posted in 101
Tags: business valuations

Personal/Professional Goodwill – How It Affects Value Of Small Business

Goodwill Defined. The term “Goodwill Value” is a term of art that is applied to the incremental increase in value of an enterprise over and above the simple replacement value of the fixed assets. Unless it is added to a balance sheet reflecting an actual purchase of goodwill in an acquisition, it almost never is [...]

Posted by Jerry Barney on Friday, May 29th, 2009
Posted in 101
Tags: business valuations

Understanding Recasting

There are various approaches to valuing companies. For privately-held companies that are established and generate income, normalized net operating cash flow is usually the starting point for valuation. All other qualitative issues related to the merits of a company, such as its market position, intellectual property, etc. can be factored in but the bottom line [...]

Posted by Jerry Barney on Tuesday, May 12th, 2009
Posted in 101
Tags: business valuations

Minority Discounts: Defend Them or Lose Them

Minority Interests are Worth Less Than Control Interests. It is simply a fact that minority interests in closely held companies are worth less, pro rata, than control interests. Minority interests are usually considered to be 50% or less. In appraisal terms this is the difference between Fair Value, and Fair Market Value. To illustrate the [...]

Posted by Jerry Barney on Tuesday, May 5th, 2009
Posted in 101
Tags: business valuations

Business Valuation in the Current Declining Market

It likely does not come as a surprise that business valuations have dropped dramatically since October 2008. Many owners are wondering how to assess their current value and how to plan for the future. Here are some current trend observations by American ValueMetrics Corp, which is a national business appraiser. Please remember that these are [...]

Posted by Jerry Barney on Wednesday, April 29th, 2009
Posted in 101
Tags: business valuations