Also, see the section on our BV Research.

Business Valuation Discipline

Our practice in the Business Valuation discipline began in 1972 with the appraisal of a local oil distributing company. Prior to 1980, the demand for business valuations in this country was very limited, mostly for public companies. They were usually performed by brokerage houses or specialized valuation firms in the major cities. In the early 1990s, when the local public began to recognize that private businesses can have substantial value like their public counterparts, the local demand for this service increased, creating a need for local business valuation expertise. Parties seeking more sophisticated estate and gift tax planning, equitable distribution, and accurate values for transactions, began seeking knowledgeable individual or firms who could perform credible business valuation assignments that met the requirements of the IRS, the courts, and the requirements of buyers and sellers in the market.

In 1920 the IRS adopted its first ruling about valuations during the prohibition, for valuing distillers' brand names, who wanted a way to write off the intangible value of their brands. In 1959 the IRS adopted Revenue Ruling 59-60 which set forth significant and currently employed requirements for business appraisals. As the public's demand for valuation services grew, the following organizations began a process to privately "certify" business valuation specialists.

The Institute of Business Appraisers (IBA), organized by business brokers, recognized a need to qualify and certify business appraisers to bring some order to the methods, standards, and techniques in the valuations of firms and to give the public a method of selecting credible appraisers in the business valuation environment. By education, examination, and experience review, the IBA certified their first appraisers in 1978 as "Certified Business Appraiser" (CBA).

The ASA had been established around 1935 to certify about 30 types of appraisers, such as machinery and equipment, marine, aircraft, art, jewelry, etc. In 1982, with assistance of the premier valuation firms, the American Society of Appraisers (ASA) established the Business Valuation discipline of the ASA.

Tom J. Keith is certified by both of these organizations and holds their CBA and ASA-BV certification. He organized the firm that bears his name in 1970 as a residential and commercial real estate appraisal firm serving the Southeast. Since then, the firm has appraised over 15,000 firms and properties having several billion in value. Since Tom received the CBA certification in 1995 and the ASA-BV certification in 2003, business valuation has become a full-time practice for the firm with many attorneys, CPAs, and estate planners as clients.

Thomas W. Bell has attended the courses required for the ASA certification and heads up the Business Valuation section of Tom J. Keith & Associates, Inc. He has over 12 years experience as Comptroller and CFO of private companies. He holds a Master in Business Administration from Wake Forest University (1983). He began with the firm in 2001.

Advantages of Business Valuation and Real Estate Together

In many businesses, the largest single asset owned by the firm or the shareholders may be the real estate.  It is important when selling a business that the owner understand the value of the real estate and its importance in the operation of the business.  Many businesses are extremely dependent on location.  These businesses, such as fast food restaurants and convenience stores, tend to be more sensitive to traffic flow. Other businesses, while somewhat dependent on location, may be more dependent on being in a certain area, but less dependent on traffic flow. These businesses include retail establishments such as furniture stores or apparel retailers. Other business, such as service businesses, may have no dependence on the actual physical location.

It is important when selling a business to understand not only the dependence of the business on location, but also the values and alternate uses of the real estate. 

There are times when the business itself may not support the real estate it occupies.  For example, a plumbing company may have been at the same location for 30 years, whereby the company owns the land free and clear.  However, if the owner is planning to sell the business, it may be more beneficial to sell the real estate separate from the business and relocate the business to a location with lower market rent.

In many cases, an interested buyer of a company may only be interested in the customer list or the brand name of the product sold by the firm.  This is generally known as a "strategic" or "synergistic" sale.  The interested buyer may wish to relocate the operations of the existing firm without interest in the real estate owned by the current owners.  It is important to understand the alternate uses and value of the real estate.

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