FMV appraisal of your business

[Bill Ballard]

yo, list:

Who here has had to come up with a Fair Market Appraisal of their 
business? (For instance, in a divorce situation?)

The physical aspects are easy.  A thorough inventory of all 
machinery/tools, all merchandise/materials, and all "raw material and 
on their side" pianos, with some mutually agreed upon basis for 
resale value.

Murkier is the customer list. Were that list to be sold what are the 
chances that the buyer would be successful in getting the people on 
that list to transfer their allegiance from the technician of long 
standing to this newcomer, even with the best efforts of the seller 
in this transition. And based on an anticipated "nominal failure 
rate", how much of the value of that list be discounted.

Further yet is the issue that the main ingredient in this business in 
manual labor, however skilled. Presumably buyer this business would 
have skills comparable to the seller, or he would soon find all of 
his accounts (for both service and rebuilding) leaving. Also, the 
capacity for the manual labor required and the tolerance for the long 
hours of self-employed people have to be a given in the buyer. All of 
this shrinks the pool of potential buyers, lessens the demand for the 
deal being offered, and depresses the price.

Further yet is the fact that while the proud new owner of this 
business would in the best of circumstances have a customer list 
already established and physical means (shop equipment etc.) to make 
his/her own dream come true, ie. being a self-employed piano 
technician doing a broad spectrum of work in a bucolic rural setting, 
most of the benefits of this dream are *not* financial. Remind 
ourselves again, are we in this business for the money? If we were, 
could we say that we were in the right business?

Given this fact that the rewards are not entirely financial, would an 
astute buyer bid down the business's purchase price correspondingly?

There's plenty on this discussion for open discussion by the list. 
Those of you who have actually been through this process (FMV 
appraisal of your business, under any circumstances) may reply 
privately as to how the appraisal was based, and how that work out 
for you.

Thanks in advance.

Bill Ballard RPT
NH Chapter, P.T.G.

"The law gets you into everything. It's the ultimate backstage pass. 
It's the new priesthood"
     ...........Al Pacino in "Devil's Advocate"
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