In February 2012, Grimbleby Coleman Principal Martin Fox earned his Accredited in Business Valuation (ABV) designation from the American Institute of CPAs. We took a moment to ask him a few questions about the ABV, business valuation, and his relationship with both.
Marty, give us a brief overview: what is business valuation?
Business valuation is a complex process to determine the worth of a partial or full interest in a business or entity. This can include anything from a sole owner of an operating business to a minority interest owner in real-estate partnership. Business valuation requires knowledge of accounting, finance, economics and business, along with expertise in valuation methods.
When did you become interested in business valuation?
In the mid-‘90s I became intrigued with business improvement. Why were similar types of businesses so dissimilar in profitability? What made some successful and others just so-so? Using my many years of experience with business, I began to help owners make better decisions by focusing on the profit drivers. These same drivers affect the ultimate value of the business. If a business can be focused on the right drivers (and sustain that focus), it can achieve superior performance and significantly improve its value. Business valuation was a natural extension to tie together the profit drivers, sustainable performance, and exit value for the owner. Business valuation completed the progression.
What is required to earn your ABV designation?
A CPA who holds the ABV designation must demonstrate significant experience in business valuation, pass a rigorous 6-hour exam, and obtain a minimum of 60 hours of continuing education every three years.
What can a CPA with ABV accreditation offer that your average CPA cannot?
CPA/ABVs have demonstrated expertise in valuation methodologies and professional standards, in addition to competencies in accounting, taxation, financial analysis, and business operations. This expertise is often a requirement for valuation reports submitted to taxing authorities or courts of law, and offers additional assurance that the professional has an adequate understanding of current bodies of knowledge.
What are the top 5 reasons a business valuation expert should be contacted?
- I want to sell my business. How do I maximize its value and what’s it worth?
- I need to determine the fair market value for estate or gift tax purposes (including a thorough understanding of discounts for lack of control and marketability).
- I’m converting my C corporation to an S corporation and I have to establish the goodwill value.
- I have a buy-sell agreement with my co-owners and now one of us wants out. What’s the buy-out price?
- I need to obtain financing for a new or existing business. The bank needs an independent appraisal.
What is the most rewarding part of doing business valuation?
I love numbers and I love business. Every business is unique because every owner has imprinted a unique personality and philosophy on the business. Each business is a creation of its owner (or successor) and a strong emotional bond exists between them. My job is to understand what makes the business tick and how that translates to sustainable cash flow and perceived risk. There are many ways to build a sustainable business, but it comes down to focus. Business valuation is about understanding how that focus impacts the cash flow and risk of the business, how it is positioned in the market place, and how it appeals to the prospective pool of buyers.
For more information about the ABV Credential, please visit the AICPA ABV overview page.