So…my new employer wants me to go ahead and begin taking CPE courses to learn how to value businesses. Really, all I know is what I’ve learned in grad school and the CFA program. Hopefully the CPE will teach me how it’s done “in real life”.
I ordered some CPE through the AICPA and Gary Trugman’s “Understanding Business Valuation” book. Anybody else know any good resources? (I already have Pratt’s book, although it’s a little dated.)
Specifically, I wonder if there’s any software out there that helps with this. Higgs, don’t you work in a group that does valuations?
(NOTE - I will be valuing companies for estate tax or M&A reasons, so I’m looking at closely-held family businesses. Won’t be valuing the Exxons or Wal-Marts of the world.)
I second Damodaran. Trugman and Pratt are also good for the basics. There is no such thing as good valuation software. I suspect your employer will want you to start working toward the ABV certification as well. It’s even more a piece of crap than ASA, but at least the basics covered in the classes should be almost correct. Gift and estate stuff can be pretty lucrative if you have clients with a lot going on, otherwise it’s a PITA. You better get up to speed on appropriate discounts on values of assets held in partnerships, trusts and LLC’s as well; court cases are the place to start. I also suggest you look into a subscription to the library at BVResources.com.
^ Not so much a complete set, but just get every book he has. He writes them in a way that one can use them as a business reference literally spelling out how one should arrange their financial model.
Heck, I even used it not too long ago when I had to create a model for a job interview on a specific valuation. I then listed in a footnote, 'Per Damodaran…" They were impressed.
I own Investment Valuation, Dark Side of Valuation, and Damodaran on Valuation. All easy to read clear books.
I’d recommend signing up for the next American Society of Appraisers BV 201 course. This is a four day introductory course that will provide good materials (you can keep these) and also serves as a networking opportunity for you to learn more about the industry from other BV professionals.
I don’t know what kind of valuations you or BValGuy do, but if it’s part of a tax return (a 706-estate tax return), it has to be done by a “Qualified Business Appraiser”. I can’t find anything that says that CFA qualifies (or doesn’t qualify) as a “qualifiied business appraiser”. Anybody have any experience with this?
@BVG - do you know of any mentoring programs? I live in a pretty small community, and I don’t think that anybody around here would like to help a young buck learn how to do it, because it would be taking away revenue from them. I also don’t have bosses or others in the company who do valuations, so it would basically be learning all on my own.
^ I do very little tax related work, which is far too much in my opinion, but it is my understanding that no one knows for sure yet where CFA fits with regard to being a Qualified Business Appraiser and they won’t until some tax court judge decides to include or exclude a valuation based on the appraiser being a charterholder. Should be pretty easy for you to get ABV though, so you won’t have to worry about it.
No personal experience as to what exactly a “qualified business appraiser” is, but designations solely dedicated to the art of BV (ASA, ABV) surely must hold weight in that definition. Certainly there are aspects of the CFA program that would have to be considered relevant, but not sure if it counts or not (or if this has even been ruled on before). I do know for certain that there have been court cases where judges have cited lack of relevant designations as rationale for making adverse judgments.
No, I’m not aware of any mentor programs. If I were in your shoes, again, first thing I would do is sign up for BV 201 (www. appraisers.org). Looks like it is being offered next month in Chicago. The ASA is a national organization and there is no better recognized BV credential. Then, I would seek out a local ASA chapter to join and meet fellow BV appraisers. Generally these are located in cities, so it may be a hike for you depending on how remotely you live.
If I remember correctly, the ASA Advanced BV conference is being held in San Antonio this year. I believe it’s in October. If you bosses won’t pop for a flight to Chicago, maybe they’ll be okay with SA. They generally offer all the BV courses in conjunction with the conference.
Yeah, I looked at that–especially since I used to live in San Antonio. In fact, that’s probably the CFA/ASA society that I’ll join, if I ever make it that far.
The problem is that it is from October 10-13. Really bad timing for a tax accountant. But at least the Cowboys play the night game on Oct. 13.
BVG seems pretty big on the ASA, but Higgs suggested that it’s a joke. What’s the deal there?
In terms of rigor, the ASA doesn’t come close to CFA. It is not overly challenging, but the ASA is the best that is out there, and the introductory courses will be good primers for the foundations of the BV profession.
^ Agree with BValGuy. We encourage our people to pursue their ASA and value the benefit of the basic classes, but it’s rather easy to pass the classes. Within the world of tax valuation though, ASA is probably more relevant than CFA.
@Higgs and BVG - you think I should do this to get the ASA cert? Or is it because of the knowledge gained?
I ask, because if I finish the ABV cert, I am exempt from all the BV 201-204 classes that you need to get the ASA certification for business valuation. So if it’s just about the certification, there’s an easier and cheaper way to go.
(EDIT - on the same token, if I finish BV201-204, then I’m exempt from the ABV examination, too.)
If the experience of going to the class adds a lot of real value, then I’ll look into it. (Quite frankly, I’m kinda tired of collecting designations just for the sake of collecting designations.)
My original recommendation of attending BV 201 was more just to be in a setting where you’re surrounded by other BV professionals and also obtaining the reading materials (can be a decent reference source in the future). The designation is a nice thing to have (although it requires 5 years of BV work exp), but since you gave the impresssion of being new to the industry, I figured a 4 day crash course would be beneficial in your case.
We use the ASA classes as outsourced training for our new hires, so they are quite useful for the basics. If ABV classes teach the same things, mission accomplished.
Now this is some BS (and I don’t mean Black Swan).
Talked to the employer, and he says this is a good idea. Tells me to sign up for it. Mind you–the conference starts on Thursday and ends at 5 p.m. on Sunday.
August 15 - can’t do it–tax season
October 10 - tax season
May 1 - tax season (TX franchise tax)
so that only leaves January 9 in Washington DC. Gonna be cold as hell, and I’m going to miss the divisional playoffs.
Oh well. I guess we all have to make some sacrifices for our career. But if I miss a Cowboys playoff game, I’m gonna be pretty pissed. (Not that it’s very likely, though.)
