The level of value used in a business valuation may affect an expert’s analyses and techniques. This article explains how experts determine the appropriate level of value and why it’s critical to make this determination before work begins.
Owners of privately held businesses may draw large salaries because of tax advantages or take little or no salary to enhance the company’s reported earnings. In these cases, the valuation expert needs to “normalize” owners’ compensation and adjust it to a reasonable level. This article identifies factors that valuators consider in determining reasonable owners’ compensation.