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BVR's 2011/2012 Business Valuation Firm Economics & Best Practices Guide
Business Valuation Resources, June 2011, Pages: 101
BVR's 2011/2012 Business Valuation Firm Economics & Best Practices Guide is this year's most vital management tool. Benchmark your firm's performance to see how you compare with your peers.
Hundreds of firms responded to the survey to make this the largest and most thorough analysis of best practices in business valuation, firm management, marketing, human resources, and compensation
The number of firms offering business valuation services has more than doubled in the last 10 years alone, though the growth in new practices is showing the first sign of decelerating
Firms within the Business Valuation profession are growing more rapidly than any other major professional service firm niche.
- Last year was not as successful as previous years for the owners of business valuation firms. Less than a quarter of all firms in the profession increased partner compensation in 2010. More than one in four reported lower earnings at the partnership level.
- Six in 10 firms raised their billing rates last year, but the average increase for all firms (including those that did not) was less than the rate of economic growth—2.1%. And, only two of five firms anticipate raising their appraisal fees in 2011.
- Competition from new entrants to the business valuation market is still intense. The number of firms offering business valuation services has more than doubled since 1998, but for the first time it appears the number of new firms is slowing slightly.
- The total business valuation revenues earned by firms participating in this year ’s survey was $685 million. This report venture to guess, based on participation rates, growth rates, and market demographics, that the business valuation profession earned the distinction of becoming a $1 billion annual business sometime in late 2007, and is likely to gross over $1.6 billion in 2011.
- Compensation for junior and senior analysts has not increased since 2008—and in some cases has decreased. And fewer firms are offering incentive compensation “bonuses” now than were two years ago. Average starting base compensation for a new financial analyst nationally is still holding at just below $50,000 annually— though pay goes up rapidly as experience and client contact increases.
- The business valuation profession invested, on average, 4.8% of revenues on marketing. This is less than in previous surveys. Direct contact with existing and prospective clients continues to be the most effective practice development technique by far.
- Of all the revenues reported in this Guide, 42% were referred to from lawyers. The other major sources of business, though less significant, were business owners themselves, current client referrals, and CPA/CA firms, both national and regional/local. Brokers and the mergers and acquisition market are generating a small but increasing book of business for some firms as well.
- Fewer CPA firms with business valuation practices responded to this year ’s survey. The decrease was significant enough to suggest that more CPA firms are exiting the business valuation business for risk avoidance or other reasons.
- The trend toward multi-office firms, whether via internal growth or merger, stalled during the last two years after significant growth earlier. The single office business valuation firm is still very much the norm.
- Research resources have become more plentiful. More appraisal firms are using more reference databases and tools to support their valuation assumptions than ever before.
1 EXECUTIVE SUMMARY
2.1 Years in the business valuation profession
2.2 Job title of person completing the survey
2.3 BV practice headquarters location
2.4 Number of offices or locations per firm
2.5 Form of business organization
2.6 Primary business of firms providing business valuation services
2.7 Total gross revenues from business valuation activities only
2.8 Total gross revenues from all sources (business valuation and all other billings) and percent of revenues derived from business valuation services
3 FINANCIAL MANAGEMENT
3.1 Growth rates and estimates
3.2 Business valuation firm specialization
3.3 What is the fastest growing specialty in your practice?
3.4 Most profitable business valuation practice area
3.5 Percentage of total business valuation billings from litigation and non-litigation work
3.6 Realization and utilization rates
3.7 Annual billable hour targets
3.8 Revenues per employee
4 STAFF RATIOS, HIRING, QUALIFICATIONS, AND CERTIFICATION
4.1 Professional and staff employee counts
4.2 Professional/administrative staff ratios
4.3 Professional Certification
4.4 Hiring in the past2 months
4.5 Current professional and support staff shortages
4.6 Hiring plans for the next2 months
4.7 Incentives for new hires
4.8 Business valuation staff benefits
5 STAFF COMPENSATION AND INCENTIVE COMPENSATION
5.1 Average staff base salaries and incentive compensation
5.2 What was the average percent salary increase awarded during the last2 months?
5.3 Performance incentives for business valuation professionals
5.4 Bonus compensation plan documentation
5.5 Factors considered when calculating bonus compensation
5.6 Staff included in firm's bonus compensation plan
5.7 Bonus compensation forecast for011
6 PARTNER PROMOTION, COMPENSATION, AND POLICIES
6.1 Partnership promotion
6.2 Partnership or shareholder agreements
6.3 New partner capital contributions
6.4 Distributions to partners
6.5 Partnership distribution formulas
7 BILLING AND FEES
7.1 Engagement letters and standards compliance
7.2 Engagement - down payments - and retainers
7.3 Business valuation billing practices and methods
7.4 Use of hourly billing for business valuation engagements
7.5 Hourly billing rates for business valuation services
7.6 Average increase in hourly or standard flat flee billing rates for011
7.7 Research costs recovery practices
7.8 Do you charge late fees for delinquent client bills?
8.1 Who has primary responsibility for your firm's marketing?
8.2 Sources of new and referral business valuation revenue
8.3 Other referral sources for business valuation engagements
8.4 Newsletters, e-zines, blogs, social networking, and other client communications
8.5 Business valuation firm web sites
8.6 Most common business valuation firm marketing methods
8.7 Most effective marketing methods
8.8 Marketing budgets
8.9 Planned improvements in marketing for 2011
9 BUSINESS VALUATION RESEARCH AND TECHNOLOGY RESOURCES
9.1 BV research budgets
9.2 Most popular BV research databases and tools
9.3 Do you outsource any research tasks?
9.4 Use of packaged valuation report-writing software?
10 PROFESSIONAL & MANAGEMENT CONCERNS
10.1 What do you consider your firm's most pressing management-related challenge?
10.2 What do you consider the business valuation profession's most pressing
10.3 What do you consider your firm's most successful new management practice
or policy for this year?
11 Appendix:2010 FIRM ECONOMICS & BEST PRACTICES SURVEY