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- Understanding Business Valuation
| Summary Page 88 of 141 Important characteristics of the overall IBA database include • The price‐to‐earnings and price‐to‐gross‐revenues multiples are almost equally valid criteria for estimating the market value of businesses. • Empirical data for all business categories, in aggregate, does not show any significant change in business value as a function of time. • The data shows no significant correlation between the selling price and the percentage down payment. This implies that the values derived using the IBA database are in fact cash equivalents on anon marketable basis. • Business values as measured by the price‐to‐earnings and price‐to‐gross‐ revenues multiples differ from one kind of a business to another. However, the difference is not as large as might have been expected. This suggests that a search for comparable transactions need not be limited to only those in a specific four digit SIC code. The above was excerpted from Gary Trugman’s book, Understanding Business Valuation, writing about Raymond C. Miles (founder and past Executive Director of the IBA). Trugman continues by reviewing the data Miles has presented and concludes that his findings were accurate … transactions that were 10 and 15 years old, inmost industries, are still valid today Even geographically, the multiples were not materially different As stated in Revenue Ruling 59‐60, the valuation must be undertaken with the unique attributes and circumstances of each subject interest being valued. Therefore, the results of any analysis performed while considering the general findings of Gary Trugman and Raymond Miles must take into account variations exhibited in the IBA database relative to the subject interest being valued. 13 Trugman, Gary R. 2002. Understanding business valuation ‐ A practical guide to valuing small to medium‐sized businesses, 2nd Edition. New York American Institute of Certified Public Accountants. p. 225. 14 Trugman, Gary R. 2002. Understanding business valuation ‐ A practical guide to valuing small to medium‐sized businesses, 2nd Edition. New York American Institute of Certified Public Accountants. p. 225. Page 89 of 141 The following statistics were derived based on these 36 transactions Download 0.84 Mb. Share with your friends:
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