BV Engagement Research

A four-pronged approach to understanding the data.

Gathering data is a key element of a business valuation analysis—and you must assemble enough to analyze your subject company from all sides.

Client data. Once you’ve gathered the audits, the tax returns, the business descriptions and marketing materials, you will realize—with apologies to Joni Mitchell—that “you’ve looked at the company from both sides now and you really don’t know the company at all.” To really understand it, you have to look at it in the context of its environment—the competition, the economy and the industry.

The economy. To understand the company’s environment, a business valuation analyst might start by gathering and analyzing data on local and national economic conditions. The National Economic Review ( ) gives an overview, written specifically for valuation analysts, of the major factors affecting the economy. Regional federal reserve banks ( ) publish articles on economic conditions within their districts. City newspapers ( ) and business journals ( ) often publish stories on local economic conditions, particularly at yearend.

Competition. Industry conditions and competition also significantly influence value. Trade associations can provide operating ratios, industry studies and trends. First Research ( ) produces detailed, independent industry analysis reports. To look at the competition, use one of the Dunn & Bradstreet databases ( ).

Market transactions. Finally, depending on your particular valuation engagement, you also may need to review guideline public companies or guideline transactions for the market approach. Yahoo Finance ( ) is a good starting place for data on publicly traded companies and Pratt’s Stats ( ) offers data on more than 8,000 private company transactions.

Eva Lang, CPA/ABV, ASA, executive director,
Financial Consulting Group, Germantown, Tenn.


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