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Valuation Challenges Involving Closely Held Businesses

Valuation Methodologies, Minority Interest and Marketability Discounts, Tax Considerations, and Accounting Adjustments

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Wednesday, February 20, 2019

Recorded event now available

or call 1-800-926-7926

This course will provide accounting advisers with a thorough and practical guide to the methodologies and common challenges of providing valuations of closely-held businesses. The panel will detail the specific approaches to valuing smaller private companies, describe the unique challenges of determining discounts for non-controlling interests, and discuss marketability discounts which impact the value of closely-held businesses.


The valuation of closely held companies often presents unique challenges for even seasoned accountants, attorneys and valuation professionals. The private nature of the business, difference in accounting processes from larger public entities, even the reasons for valuation, each contains specific complexities not found in valuation of publicly traded companies.

Whether the valuation is driven by financing requirements, shareholder disputes, merger activities, buy-sell agreements, tax liability issues, or other litigation can be a factor in determining what valuation approach to use. Advisers must be able to identify the appropriate methodologies to employ, based on the nature of the business or interest being appraised, as well as the purpose of the valuation. Additionally, advisers must factor in current and projected market conditions, as well as the marketability of non-controlling interests. Also, valuation professionals must recognize the impact of a minority discount for non-controlling interests in the closely held firm.

There are three primary valuation approaches in determining the worth of non-publicly traded companies. A critical determination for valuation professionals and those they advise is recognizing when to use the market approach, the income approach, or the adjusted balance sheet (or asset) approach. Often the approach is influenced by whether the valuation is being conducted for transactional, litigation, or planning purposes.

Listen as our experienced panel of valuation experts provides a practical guide to meeting the challenges of performing valuations on closely held businesses.



  1. Reasons for valuation and impact of valuation purpose on approach and methodology
    1. Sale or purchase of a business
    2. Shareholder disputes
    3. Succession and/or wealth transfer planning
    4. Marital dissolution
    5. Tax liability determination
  2. Generally accepted valuation approaches
    1. Standard of value
    2. Premise of value
    3. Market approach
    4. Income approach
    5. Adjusted balance sheet approach
  3. Discounting challenges
    1. Level of value concept
    2. Controlling interest vs. minority interest
    3. Lack of marketability
    4. "Key man" impact on value
  4. Issues and possible mistakes with each approach
    1. Using an incorrect valuation method
    2. Improper adjustment to accounting records
    3. Overstating goodwill in an established business
    4. Failing to assess your company-specific risk


The panel will discuss these and other topics vital to the valuation of closely held businesses:

  • How the reason why the valuation is needed can influence the valuation approach
  • Shortcomings and potential risks of each of the primary valuation methods
  • Why valuation advisers should not assume all ongoing businesses have measurable goodwill
  • Risks associated with normalization adjustments when using the market and income approaches
  • Risks of incorrect accounting adjustments in using the adjusted balance sheet approach
  • Determining appropriate discounting methods for valuing noncontrolling interests in closely held businesses and interests that lack marketability
  • Adequate documentation to properly support the conclusion of value


Klerowski, Jon
Jon P. Klerowski, CPA, ABV, CFE

Floyd Advisory

Mr. Klerowski has significant experience advising executive management, boards of directors, and their counsel on a...  |  Read More

Maloney, John
John F. Maloney, CPA, CFF, CVA, ABAR

Founding and Managing Partner
Wouch Maloney & Co.

Mr. Maloney's experience involves all areas of taxation, accounting and auditing, management consulting and...  |  Read More

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