Is It The Pie? Or, How You Slice It?

It appeared as one of a series of blurbs running vertically down the left margin.  The kind that let you absorb all manner of information with a mere nod of your head.

I don’t remember what it said, exactly.  I do remember thinking here was evidence that the term was creeping into the mass vocabulary.  Though I still hear mistaken references to “business evaluation”, most people I talk to seem to understand what it is.

In these last ten years, the growth of the overall pie may be largely because there are more people doing – and talking about doing – valuation.  It’s worth questioning whether the continued infusion of practitioners will be a catalyst for growth.  Is there a saturation point?  When does the increased supply start to impact pricing?  Some might argue we’re there.

The pie does continue to get bigger for those professionals who are paid to defend their opinions in the courtroom.  More and more attorneys, it seems, are seeing value in hiring them.  As potential damages rise, and cases turn more and more on nuanced interpretations of the facts, appraisers’ work can be more critical.  And, let’s face it: attorneys hate to lose.  They’re interested in anything that will give them an edge.

I’ve recently read commentary about increasing specialization and a knowledge explosion in business valuation.  I see them as two sides of the same coin.  As if staffing pressures weren’t already enough, practices now have to make sure they hire experience in particular sub-sets of engagements.

The profession remains a unique one.  And therein lies an explanation for the seemingly perpetual talent shortage.  Below a certain level in your hierarchy, you can afford to add new hires with related experience: a corporate finance analyst from industry, a credit analyst from a bank.  Above that level, however, the only place you can go for what you need is the industry, itself.  Issuing an opinion of value, it turns out, is largely a function of judgment that is not easily or quickly acquired.

Increases in a specific kind of engagement are often the impact of regulatory shifts.  Then, attention turns more to how the pie gets sliced.  When FAS 141 & 142 first came on the scene, it appeared that everyone wanted to be part of “the next big thing”. Some have done pretty well.  Others, less so.  The advent of the 123r valuation has opened an entirely new avenue of work.  For many practices, it’s meant another arrow in the quiver.  For a few, it’s a significant portion – if not the entire piece – of what they do.

History suggests (think: dot com, Enron) that there will be more, not fewer, of these regulatory-driven types of engagements.  Practices that move into those areas as part of a strategic plan will likely do well.  Those who chase them as “the next big thing” may have a harder time.

There is little question in my mind that business valuation will continue to expand for the foreseeable future.  Not unlike attorneys, good appraisers are positioned to make money in good times and bad.

We’ll be at the AICPA/ASA BV Conference in Las Vegas in November as both Presenter and Exhibitor.  Come say hello and share your thoughts about this exciting profession.