UNRELIABILITY OF THE SMALL BUSINESS TRANSACTION DATABASES AND THE GUIDELINE COMPANY METHOD

Pratt's Stats is more pliable to a guideline company method than are the Bizcomps or the IBA databases. However, Pratt's Stats is not without its own set of inadequacies, some similar to the other databases and some unique, which likewise renders its application to the guideline company me...

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Bibliographic Details
Published inValuation Strategies Vol. 8; no. 1; p. 24
Main Author Wolpin, Jeffrey B
Format Trade Publication Article
LanguageEnglish
Published Boston Thomson Reuters (Tax & Accounting) Inc 01.09.2004
Subjects
Appraisers
Business valuation
Online data bases
Real estate appraisal
Sales
Small business
State court decisions
Statistics
United States > US
Online AccessGet full text
ISSN1557-2919

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Summary:Pratt's Stats is more pliable to a guideline company method than are the Bizcomps or the IBA databases. However, Pratt's Stats is not without its own set of inadequacies, some similar to the other databases and some unique, which likewise renders its application to the guideline company method very difficult and problematic. Due to the sampling bias, the enormously wide variation apparent in businesses and business sales, the inadequacies of the databases to capture the reasons for the wide variation, and the problems appraisers face in uncovering missing value drivers from the brokers that submit the data to the database compilers, any adjustments one might make to the guideline companies for a subject under appraisement is often mere speculation. It is unfortunate that, rather than improve on the databases, the suppliers have instead chosen to expend their efforts denying their limitations and inadequacies, distorting fundamental appraisal principles, dismissing fundamental statistical methods and reasoning.
ISSN:1557-2919