The harmonic mean is a popular measure of statistical central tendency. However, it should be avoided because it is biased, according to an article in the January 2015 issue of Business Valuation Update. In this webinar, Bob Dohmeyer (a co-author of the article) and Pete Butler review the statistical fundamentals for use in a business valuation and show how a statistical regression approach is the most accurate way to use statistical data to accurately estimate the fair market value of your subject company.

• Background–Need For Regression
  • Mean, median, harmonic mean: are they biased?
    • The low bias of the harmonic mean
    • The case for the median
    • Statistical irregularity in reversion to the mean
    • Implications
  • Statistical error: Bias in the nature of the population
  • Major implication for income approach
• II Advanced Central Tendency (Regression)
  • Shortcoming of simple central tendency
  • Linear Regression
  • How to in Excel
  • Regression Example using BIZCOMPS

• Identify errors inherent in the use and application of basic statistical methods;
• Associate the implications of statistical selection and use errors with common business and valuation assumptions;
• Define how to best prepare for, avoid, or account for errors inherent in these statistical methods;
• Learn inherent shortcomings of central tendency;
• Learn how to use Excel to perform a regression analysis;
• Learn how to apply a regression analysis to a market approach; and
• Learn the concept of “economic rents” and its implications on both the market and income approach