The Market Approach: A Neglected and Misunderstood Aspect of Business Value

Sheeler, Carl L.
May 2004
Journal of Financial Planning;May2004, Vol. 17 Issue 5, p64
Academic Journal
The article describes an approach used in valuing a privately held business and professional practice called the market approach. It also explores the approach's underlying theory, strengths and weaknesses, the methods most commonly applied and the rationale for the consideration, application, adjustment, selection, and weighting of price multiples and final value outcomes. Legal and financial professionals historically have relied on various income approach methodologies when valuing privately held business and professional practices. But the market approach methodologies often provide a more accurate valuation. The income approach reflects what an investor might pay based on a probable pool of buyers and sellers. The market approach examines actual agreed-to-prices. Despite frequent objections to the contrary, there is no lack of available data on comparable business sales in order to apply the market approach. The analyst must be able to defend the selection of comparable businesses and any adjustments that need to be made. If the market approach results are independently determined and appear consistent with results from the income approach, the greater the confidence of the results will be. INSET: Executive Summary.


Related Articles

  • The Valuation Of Special Items. Eames, Michael J.; Sepe, James // Journal of Applied Business Research;Summer2005, Vol. 21 Issue 3, p61 

    This research examines the value relevance of GAAP earnings, GAAP earnings excluding special items, and specific special items. We find GAAP earnings to be less value relevant than GAAP earnings adjusted to exclude special items. We find mixed results relating to the value relevance of net...

  • Quantifying Terminal Growth Rates: Some Empirical Evidence. Sellers, Keith F.; Greiner, Adam J.; Schaberl, Philipp D. // Value Examiner;Nov/Dec2013, p8 

    The article argues that the valuation analyst's terminal growth rate estimate is equally important to the valuation process and must receive more comprehensive consideration than it does at present. It evaluates historical long-term growth rates and provides applicable empirical evidence for...

  • BVR TRAINING EVENTS.  // Business Valuation Update;Nov2016, Vol. 22 Issue 11, p32 

    A calendar of training events related to the business valuation resources (BVR) in the U.S. from November to December 2016 is presented which include the Hospitality Valuation: Check In Time, the Measuring Unjust Enrichment, and Valuation of Small and Medium Sized Software Companies.

  • From an investment counselor: how to pitch your company. Wong, Milton K. // Financial Executive;Jul/Aug1988, Vol. 4 Issue 4, p35 

    The article focuses on how companies can establish good communication with investment counselors, develop a reputation of credibility, and get the best valuation for their corporate stock. The discussion includes the: criteria used by investment counselors to assess the independence of the...

  • Abraham's Steps to a Multimillion Dollar BV Practice.  // Business Valuation Update;Aug2012, Vol. 18 Issue 8, p1 

    The article discusses myths that prevent business valuation (BV) professionals from building their own practices as discussed by valuation expert Mel Abraham in his keynote speech at the 2015 National Association of Certified Valuation Analysts (NACVA) Consultants' Conference in Dallas, Texas....

  • Insights Into Private Company Multiples in the United Kingdom.  // Business Valuation Update;Jun2015, Vol. 21 Issue 6, p1 

    The article offers information on the 2015 edition of "BVB Insights: Data and Analysis on UK Private Company Multiples," published by Business Valuation Benchmarks Ltd. Topics discussed include transaction data for 10 high-level industries in Great Britain, and details about 250 private-company...

  • Coping With the Challenges of Valuing a Cannabis-Related Firm. Marty, Jim; Seigneur, Ron // Business Valuation Update;Nov2016, Vol. 22 Issue 11, p11 

    The article focuses on the challenges faced by business valuators in valuing a cannabis-related business in the U.S. The complexities involved in the appraisal of businesses whose products are illegal to grow or sell under a federal law are discussed. The strategies of the valuators in...

  • Court Nixes Royalty Calculation Relying on Unalike Prior Licenses.  // Business Valuation Update;Nov2016, Vol. 22 Issue 11, p26 

    The article focuses on the case that focused on a trademark dispute in the U.S. It offers details of the background of the case in which the plaintiff designed, built and sold snowmobiles and all-terrain vehicles while the defendants are two related companies that sells custom-made V8...

  • Court Upholds Inclusion of Premarital Value in Property Distribution.  // Business Valuation Update;Nov2016, Vol. 22 Issue 11, p30 

    The article focuses on the divorce case that involves the premarital value on property distribution in the U.S. It offers details of the background of the case in which the owner-spouse appealed in the court's decision to attribute most of the goodwill to the podiatrist practice business and...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics