November 15, 2006 | | Issue 50-3

IRS delays effective date of 409A

Late last month the Internal Revenue issued Notice 2006-79, which postpones the effective date of final regulations for non-qualified deferred compensation under IRC 409A until January 1, 2008. (The original regulations, published in October 2005, proposed a January 1, 2007 effective date). “Although the IRS and Treasury Department expect to issue the final regulations before the end of 2006,” the Notice provides “transitional relief” for taxpayers to analyze and come into compliance with the final 409A provisions.  

BV Firms reporting unparalleled growth

We’ve just completed the first analysis of data from BVR’s 2007 Business Valuation Firm Economics & Best Practices Survey, and it depicts a profession enjoying almost unprecedented growth. In fact, the vast majority of respondents—over 80%—anticipate growth next year; of these, nearly a third (30%) see revenues growing by 10-25%, and a sizeable amount (18%) expect to grow their BV practices by more than 25%.

These are just the preliminary results, as we’re still receiving and reviewing survey responses. There’s still time to participate—and receive a price discount on the full survey. But today is the last day. Don’t miss the opportunity to add your data by clicking here. The final, groundbreaking report will be available by year’s end—just in time for 2007 BV firm budget planning.

Comments to AICPA BV Standards due December 15

Only thirty more commenting days left on the Exposure Draft of Proposed Statement on Standards for Valuation Services (SSVS), Valuation of a Business, Business Ownership Interest, Security, or Intangible Asset, authored by the AICPA’s Business Valuation Standards Writing Task Force. In particular, the drafters want input on these four areas: (1) oral valuation reports; (2) Interpretation No. 1 (scope of applicable services); (3) using the work of specialists; and (4) distinction between a valuation engagement and a calculation engagement. “To facilitate the Task Force's consideration of responses, comments should refer to specific paragraphs and include supporting rationale, as well as any alternative wording.” The deadline is December 15, 2006; to read the exposure draft and submit comments, click here.

And to discuss the much-anticipated impact of the new BV Standards, BVR has put together yet another top-notch panel for its January 25, 2007 telephone conference on the topic, featuring Ed Dupke, Jay Fishman, Tom Hilton, and moderator Ron Seigneur. To register, go here.

Is calculating the ERP an ‘exercise in futility’?

Gary Trugman ( was only half-kidding when he said that in calculating the equity risk premium, he usually starts with 20%—and adds a bit more if the subject company is risky, and takes it down if it’s not. That way, he avoids what sometimes feels like “an exercise in futility.”

“There’s a grain of truth in that,” agreed Jim Hitchner, who joined Gary and Jim Alerding in last week’s BVR Telephone conference on Discount and Capitalization Rates, one of our best-attended audio-seminars. The conference CD & transcript make a great training tool for BV analysts and are available here.

New website for Ibbotson’s SBBI and Duff and Phelps data

Also to come out of the Cap rates conference, we learned that the Ibbotson website is now fully integrated with the Morningstar Corporate site, to reflect their corporate integration last March. (The old web site,, is no longer operative.) So if you’re searching for the latest update to Stock, Bonds, Bills, Inflation® Valuation Edition Yearbook, you’ll need to go to the new location here, and then click on the Yearbook link.

And if you’re looking for the latest Duff and Phelps, LLC Risk Premium Report (formerly Standard & Poor’s Corporate Value Consulting Risk Premium Report), go here.

Aspen/Snowmass has over five feet of pre-season snow!

That’s according to the latest report at the ski resort’s website, which is currently under a winter storm watch, forecasting more snow for the Colorado mountains. And what does this flurry of news have to do with business valuation? For the first time, the Law Education Institute has added a business valuation track to its National CLE Conference—the 24th annual gathering to be held January 5-7, 2007, in Snowmass Colorado. Ron Seigneur has spearheaded the effort, putting together such stellar speakers as Neal Beaton (intellectual property valuation), Bob Duffy (share-based compensation), Kevin Yeanoplos (“goodwill hunting”), and Nancy Fannon (lost profits). For more information on the conference, “Where education comes first…the World-class ski resort is just a bonus,“ click here.

Dental practice valuations: now a growing niche

2005 was supposed to be the year when the number of newly-graduating dentists was going to be less than the number of retiring dentists. “So theoretically, there would have been a practice to buy for every single graduating dentist,” according to Larry Domer, MBA, DBA, ABV, who spoke at last week’s NACVA Colorado/Wyoming Chapter Meeting in Denver. But what happened: The downturn in the stock market prolonged retirement for many dentists—until now, when the models are once again predicting that, for the next ten years, there will be a dental practice available for every prospective buyer.

The problem: Most valuations of dental practices are done by brokers, whose fee is often a percentage of the sale, plus expenses. “Talk about an absolute vested interest,” Domer said. “If they receive a percentage fee, and they are doing the valuation—and they want an exclusive on the deal (as in real estate), then guess what they’ll tell the doc?” Plus, some of the valuation methods they use are “mind-boggling,” he says, including “wild guesses” and “rules of thumb” such as 100% of the latest year’s gross revenues. Sounds like dentists should read the just-released 5th edition of Valuing a Practice, A Guide for Dentists, coauthored by Dr. Domer. And then they should call a credentialed business appraiser, or trying to buy/sell a dental practice could be like…pulling teeth.

New from BVR—we’ll help grow your BV practice

Do you need to revamp your web site? Design a results-oriented email campaign? Develop a sales brochure? Build a targeted prospect database? If these resolutions are still on your list from last year, then the new BV Firm Growth and Management division of Business Valuation Resources, LLC can help. We’ll have more details coming soon to your email in-box; in the meantime, check out the new BV-specific support services at our home site.

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