Based on comments at the recent ASA and AICPA/ABV conferences, business valuation seems to be…
John Borrowman, CPC
Borrowman Baker, LLC, BV Staffing + Consulting
When asked about the longer-term viability of the BV industry, I often smile and point out that so long as we’re paying income taxes and suing each other, there’ll be a need for Business Valuation. And that neither of those drivers is going away in my lifetime.
That feeble humor aside, I do see continuing strength in the industry overall. This is not to say that things aren’t going to change. What would the world be without change?
In the BV world, the changes come from a number of elements. First, there is the impact of regulatory changes: from Congress, the Courts and industry bodies. For the first two, you have only to look at changes in tax law or its interpretation in the courtroom. The most recent example of the third is the FASB 141/142 rules addressing goodwill impairment. New – or changed – rules always mean opportunity for practitioners. Can we expect Congress to remove the sunset provision now attached to the estate tax reduction plan? Looking at a White House and Congress controlled by Republicans; you can be applauded for thinking so. On the other hand, increasing budget deficits might delay any action until further into the future.
Another major factor has been the proliferation of credentialing opportunities. Regardless what credential you hold, or your opinion of the others, you’ve probably seen the impact of this growth. Increasing the number of practitioners can actually lead to more work being created. More practitioners often means more marketing and advertising, leading more business owners to think about the uses for a valuation. The pie can get bigger for some kinds of work. At the same time, more practitioners mean more competition. And more competition can mean price-cutting that inhibits growth and undermines the ability to produce a quality product.
Finally, there is the impact of practices that appear on – and disappear from – the scene. For example, when an Arthur Andersen goes away, the industry adjusts by absorbing some of that talent into existing practices while others reincarnate under new names. Client considerations often play a material role in these shifts, leading to the tendency of entire groups to stay together. In the bigger picture, though, there may not be much change in the size or shape of the pie; only in the way it gets sliced.
Be confident that BV is going to be around for awhile. Be alert that change will be coming at you from every direction.