Midwest Business Appraisal

Defining Reasonable Compensation for Business Valuation Purposes

As a business owner, subtle biases can lead to an over-valuation of your company. However, valuation analysts don’t always understand your business like you do. So how do you find middle ground?

 

In an article from CPA Practice Advisor, author Mary Ellen Biery writes, “Many variables can make providing a defensible, rational estimate of reasonable compensation extremely challenging when a valuation analyst is conducting a business valuation according to Kevin Yeanoplos, CPA/ABV/CFF”.

 

In the article, Biery discusses:

 

  • Avoiding distortion of a business valuation

  • Problems surrounding a valuation that is too high or too low

  • 8 examples of misclassified personal expenses to watch out for

 

Biery continues, “There may not be a single adjustment that is more important than the adjustment for reasonable compensation,” Yeanoplos says. “It can make millions of dollars difference [to the business value], depending on that adjustment”. Do you need to make an adjustment to increase the profit of your business valuation?

To read more, see the full article from Mary Ellen Biery in CPA Practice Advisor.

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