< PreviousCan Restricted Stock Studies Be Used to Estimate DLOMs for Dividend-Paying Companies? I have discussed the fact that restricted stock studies provide no economic evidence to form a basis to develop restricted stock discounts (RSDs). I now address an issue that is rarely mentioned in the context of the studies: the impact of dividends on RSDs. As illustrated by Figure 1, shareholder returns come in two forms: current income or dividends (or distributions) and capital appreciation. Figure 1: Shareholder Returns It is important to understand the impact of dividends on the value of illiquid minority interests in companies, because many closely held and family businesses pay dividends. I recently found a 2008 version of the FMV Opinions (now Stout) Restricted Stock Database. It is similar to the 2004 version I used to write the earlier parts of this Déjà Vu series. The 2008 version had information on 477 restricted stock transactions, up from 430 transactions in the 2004 version. All the additions were for 2004 and earlier years, so it is essentially the same database. There are 244 pre-April 1997 transactions in the 2008 version, down from 248 transactions in the 2004 version. Perhaps a few transactions were scrubbed. The FMV/Stout database is, to the best of my knowledge, the only restricted stock study that enables the analysis of dividends, since the existence of dividends is one of the fields in the database. There is simply insufficient detail in all the other studies discussed in this Déjà Vu series. Of these 244 transactions, only 24 involved companies that paid dividends, or less than 10 percent of the transactions. There were 231 transactions after April 1997, when the SEC’s period of restriction was reduced from two years to one year (up from 182 transactions in the 2004 version). Only two of these companies paid dividends, rendering this portion of the database useless in analyzing the impact of dividends on restricted stock discounts. At the outset of the analysis, I summarize certain conclusions about dividend-paying companies: • Dividend-paying companies had lower RSDs than non- dividend-paying companies. The median discount for dividend payers was 13.2 percent versus a median of 21.9 percent for non-dividend payers. Given two otherwise identical investments, where one pays a dividend and the other does not, the dividend payer should be more valuable (and have a lower RSD). • Dividend-paying companies were also bigger and had higher market capitalizations and better operating performance, on average. So, relatively more attractive companies that pay dividends tend to have lower RSDs than non-dividend payers. • With only 24 transactions involving dividends that occurred between 1981 and 1995, the FMV/Stout database is not useful in estimating the impact of dividends on RSDs for thousands of closely held and family businesses today. Dividend Payers Have Lower RSDs I pulled the 24 dividend payers out of the pre-1997 portion of the database. This left 220 non-dividend-paying transactions in the two-year category, which I used as a basis to compare the dividend-paying transactions. In the discussion that follows, I look at the analysis in a series of tables to focus on specific aspects of the transactions. Current IncomeFuture Upside Total Return=Dividend Yield+Capital Appreciation It is important to understand the impact of dividends on the value of illiquid minority interests in companies, because many closely held and family businesses pay dividends. 10The Value Examiner ValuationThe Authority in Matters of Value ® The Master Analyst in Financial Forensics ® —Your Pathway to Determine, Defend, and Maximize Company Value Visit www.NACVA.com/Foundations or Call (800) 677-2009 Early registration discounts available. Dates and locations subject to change. 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Foundations of Financial Forensics Training Center Virtual Training Schedule June 23–27, 2025 September 15–19, 2025Table 3: FMV Opinions Restricted Stock Data Base (Circa 2008)—Analysis of Transactions in Companies Paying Dividends 2 Digit SIC Code CompanyTickerExchange Transaction Month Reg Rights Holding Period Restricted Stock Discount 60KeyCorpKEYNYS4/1/1988N238.0% 73International Lease Finance CorporationILFCOTC4/1/1989N2-8.7% 13Crystal Oil CompanyCOILOTC3/1/1981N222.1% 67Manufacturers National CorporationMNTLOTC3/1/1986Y219.6% 63Presidential Life CorporationPLFEOTC8/1/1993N212.8% 60Commerce Union CorporationCOMUOTC3/1/1996N26.7% 67Summit BancorporationSUBNOTC3/1/1986N20.0% 67Nationwide Health Properties, Inc.NHPNYS3/1/1991N25.2% 67Wellsford Residential Property TrustWRPNYS8/1/1994Y24.0% 67Pennsylvania Real Estate Investment TrustPEIAMS10/1/1991N22.8% 67UST Corp.USTBOTC9/1/1985N225.9% 60Mark Twain Bancshares, Inc.MTWNOTC7/1/1988N23.3% 67Conifer Group Inc.CNFGOTC3/1/1985N22.2% 13Production Operators Corp.PROPOTC6/1/1991N23.6% 28ICN Pharmaceuticals, Inc.ICNNYS1/1/1993N231.2% 60First Colonial Bankshares Corp.FCOLAOTC6/1/1986N213.4% 67BankEast CorporationBENHQOTC12/1/1988N2-1.8% 67North Fork Bancorporation, Inc.NFBNYS6/1/1991N221.1% 13Kelley Oil & Gas Corp.KOGCAMS2/1/1995N221.0% 38CPAC, Inc.CPAKOTC12/1/1995Y223.5% 38CPAC, Inc.CPAKOTC10/1/1995N220.0% 45AirTran CorporationATCCOTC10/1/1993N218.3% 67Health Equity Properties IncorporatedEQPNYS8/1/1991N23.9% 62Angeles CorporationANGAMS12/1/1982N228.0% Two-Year Transactions—Dividends Median2413.1% Average13.2% Minimum-8.7% Maximum38.0% Two-Year Transactions—No Dividends Median22021.9% Average23.0% Minimum-29.5% Maximum70.9% 12The Value Examiner Valuation 12The Value ExaminerA few observations about Table 3: most obvious, look at the bottom right of the table. The median RSD for dividend- paying companies was 13.1 percent, which is significantly lower than the median RSD for the non-dividend-paying companies (21.9 percent). • The transactions occurred between 1981 and 1995 (many, many years ago). • At least 10 of the transactions involved banks, insurance companies, or other financial entities, which are very unlike the remainder of the companies in the non- dividend-paying portion of the database. • At least three transactions involved real estate companies. So, financial and real estate companies account for more than half of the 24 transactions. • Seven of the companies paying dividends traded on the New York Stock Exchange, while only three of the 220 non-dividend-paying companies traded there. Market Pricing and Restricted Stock Discounts Table 4 examines the offer amounts, size of the transactions, and market pricing of the dividend-paying restricted stock issuers. Some observations about Table 4: • The dividend-paying stocks are not penny stocks. The average stock price was $17.60 per share, while the average for non-dividend-paying stocks was $7.43 per share. Eight of the non-dividend-paying stocks traded at less than $1.00 per share. Another 28 traded in the range of $1–$2 per share. Fifty-nine stocks traded from $2–$5 per share, and another 40 stocks traded from $5–$7 per share. This is not a hard analysis, but readers can get the picture that the non-dividend-paying stocks were, for the most part, speculative businesses. • The median offer amount (amount of the transaction) was $14.7 million for the dividend-paying stocks, while the median for non-dividend-paying stocks was $4 million. The corresponding averages were $17.5 million and $10.1 million, respectively. I made a separate calculation excluding five large transactions involving Republic Industries (not shown). Excluding those transactions, the median and average discounts for non-dividend-paying stocks were $4.0 million and $6.9 million, respectively. The median excluding the five transactions remained the same; however, the average discount fell from $10.1 million to $6.9 million. • The average and median percentage of shares owned by the restricted stock investors after the transaction was about 10.5 percent for dividend-paying stocks, while these statistics for non-dividend-paying stocks were about 11–13 percent, or not too dissimilar. However, as noted above, the dividend paying stocks received more dollars from their offerings than did the non-dividend paying stocks. • The median market value of equity (MVE) for dividend- paying stocks was $133 million, and the average MVE was $248 million. For non-dividend-paying stocks, the median MVE was $46 million, while the average was $122 million. Excluding the five transactions involving Republic, the average MVE fell to $74 million. The non- dividend-paying stocks were considerably smaller than the dividend paying stocks in terms of MVE. • The differing natures of the two groups of transactions can be seen when looking at the price/book value (P/B) multiples. The median P/B multiple for dividend-paying stocks was 1.7x, while the average was 2.2x. For non- dividend-paying stocks, the median P/B multiple was 5.9x, and the average P/B multiple was 27x, indicating a range of speculative pricing for the non-dividend payers. Earnings, Risk, and Dividends, and RSDs Table 5 examines earnings, risk factors, and dividends. It looks at other aspects of performance and risk for the dividend-paying companies relative to the non-dividend-paying companies. Some observations about Table 5: • Dividend-paying companies are larger in terms of revenue than non-dividend-paying companies. Median revenues for the dividend payers was $118 million, compared with only $10.5 million for non-dividend payers. • The dividend-paying companies are much more profitable, on average, than non-dividend-paying companies. The median pre-tax income for dividend payers was $9.3 million, with a median operating margin of 22.5 percent. The median pre-tax income for the non- dividend payers was a loss of $1.2 million. • Stock price volatility for the dividend-paying companies was 0.37 (median) versus 0.73 (median) for the non- dividend-paying companies. The smaller, less profitable companies had higher volatilities than did the larger, more profitable dividend payers. • Finally, the dividend-paying stocks had a median dividend of 2.3 percent, while the non-dividend-paying stocks had a yield of 0 percent. 13March | April 2025 A Professional Development Journal for the Consulting DisciplinesTable 4: FMV Opinions Restricted Stock Data Base (Circa 2008)—Analysis of Transactions in Companies Paying Dividends (All Dollars in Thousands Except Per Share) 2 Digit SIC Code CompanyTicker Restricted Stock Discount Price Per Share Offer Amount % Sh after Off Market Value of Equity Book Value of Equity Price/ Book 60KeyCorpKEY38.0%$21.00$43,323 5.0%$1,344,379 $789,382 1.70 73 International Lease Finance Corporation ILFC-8.7%$25.00$17,500 2.1%$741,711 $350,482 2.12 13Crystal Oil CompanyCOIL22.1%$26.67$25,000 4.6%$713,247 $43,269 16.48 67Manufacturers National CorporationMNTL19.6%$38.07$15,229 3.5%$485,962 $374,666 1.30 63Presidential Life CorporationPLFE12.8%$7.25$38,063 9.8%$350,900 $176,070 1.99 60Commerce Union CorporationCOMU6.7%$47.88$28,725 9.8%$259,783 $205,230 1.27 67Summit BancorporationSUBN0.0%$23.38$33,543 12.3%$245,905 $133,353 1.84 67Nationwide Health Properties, Inc.NHP5.2%$19.50$39,000 15.2%$219,002 $189,140 1.16 67Wellsford Residential Property TrustWRP4.0%$21.00$32,550 14.4%$208,564 $239,775 0.87 67 Pennsylvania Real Estate Investment Trust PEI2.8%$19.25$9,625 5.8%$159,713 $46,411 3.44 67UST Corp.USTB25.9%$25.00$7,500 5.9%$157,877 $51,195 3.08 60Mark Twain Bancshares, Inc.MTWN3.3%$18.50$10,046 6.9%$140,515 $81,571 1.72 67Conifer Group Inc.CNFG2.2%$22.63$15,840 11.4%$126,424 $118,735 1.06 13Production Operators Corp.PROP3.6%$17.00$10,030 6.9%$120,282 $33,987 3.54 28ICN Pharmaceuticals, Inc.ICN31.2%$5.20$5,200 5.7%$118,290 ($21,757)(5.44) 60First Colonial Bankshares Corp.FCOLA13.4%$17.81$14,244 18.6%$84,000 $33,610 2.50 67BankEast CorporationBENHQ-1.8%$7.00$8,400 10.1%$82,206 $70,842 1.17 67North Fork Bancorporation, Inc.NFB21.1%$7.00$10,400 13.7%$77,106 $131,386 0.59 13Kelley Oil & Gas Corp.KOGC21.0%$4.00$16,000 18.5%$76,267 $45,180 1.69 38CPAC, Inc.CPAK23.5%$11.00$6,952 10.8%$74,946 $22,649 3.31 38CPAC, Inc.CPAK20.0%$11.00$16,500 25.7%$63,217 $22,649 2.79 45AirTran CorporationATCC18.3%$7.25$10,000 16.7%$60,211 $26,365 2.28 67 Health Equity Properties Incorporated EQP3.9%$7.25$3,875 11.4%$30,256 $28,294 1.07 62Angeles CorporationANG28.0%$11.25$1,800 12.1%$15,517 $10,107 1.54 Two-Year Transactions—Dividends Medians13.1%$14,737 10.5%$133,470 $61,019 1.71 Averages13.2%$17,473 10.7%$248,178 $133,441 2.21 Minimums-8.7%$1,800 2.1%$15,517 ($21,757)(5.44) Maximums38.0%$43,323 25.7%$1,344,379 $789,382 16.48 Two-Year Transactions—No Dividends Medians21.9%$4,031,250 10.9%$45,934 $5,5265.92 Averages23.0%$10,138,671 12.9%$122,159 $20,115 26.93 Minimums-29.5%$20,000 0.2%$3,168 ($21,402)(61.56) Maximums70.9%$356,357,490 48.8%$5,726,135 $642,499 800.14 14The Value Examiner Valuation 14The Value ExaminerTable 5: FMV Opinions Restricted Stock Data Base (Circa 2008)—Analysis of Transactions in Companies Paying Dividends (All Dollars in Thousands Except Per Share) 2 Digit SIC Code Company Ticker Exchange Transaction Month Reg Rights Holding Period Restricted Stock Discount Revenues EBITDA Pre-Tax Income Op Margin Net Margin Volatility Dvd % 60 KeyCorp KEY NYS 4/1/1988 N 2 38.0% $1,167,652 $91,805 6.2% 0.28 3.3% 73 International Lease Finance Corporation ILFC OTC 4/1/1989 N 2 -8.7% $213,156 $195,627 $65,503 64.7% 20.4% 0.31 0.4% 13 Crystal Oil Company COIL OTC 3/1/1981 N 2 22.1% $253,765 $50,532 $6,951 9.5% 2.6% 0.6% 67 Manufacturers National Corporation MNTL OTC 3/1/1986 Y 2 19.6% $636,318 $54,801 7.9% 0.73 2.6% 63 Presidential Life Corporation PLFE OTC 8/1/1993 N 2 12.8% $209,008 $47,810 $38,994 22.5% 11.5% 0.53 1.2% 60 Commerce Union Corporation COMU OTC 3/1/1996 N 2 6.7% $343,239 $228,620 $28,750 64.6% 8.0% 0.19 1.1% 67 Summit Bancorporation SUBN OTC 3/1/1986 N 2 0.0% $184,795 $23,555 10.4% 0.54 1.9% 67 Nationwide Health Properties, Inc. NHP NYS 3/1/1991 N 2 5.2% $31,538 $29,432 $17,108 72.1% 54.3% 0.24 9.7% 67 Wellsford Residential Property Trust WRP NYS 8/1/1994 Y 2 4.0% $42,007 $22,375 $8,073 31.9% 19.2% 0.20 7.4% 67 Pennsylvania Real Estate Investment Trust PEI AMS 10/1/1991 N 2 2.8% $15,474 $13,265 $10,350 73.0% 66.9% 0.21 8.8% 67 UST Corp. USTB OTC 9/1/1985 N 2 25.9% $100,934 $10,629 9.2% 0.42 1.7% 60 Mark Twain Bancshares, Inc. MTWN OTC 7/1/1988 N 2 3.3% $156,680 $14,777 7.2% 0.36 3.1% 67 Conifer Group Inc. CNFG OTC 3/1/1985 N 2 2.2% $215,347 $19,673 7.6% 0.73 4.2% 13 Production Operators Corp. PROP OTC 6/1/1991 N 2 3.6% $56,187 $21,432 $8,257 19.8% 9.7% 0.37 0.9% 28 ICN Pharmaceuticals, Inc. ICN NYS 1/1/1993 N 2 31.2% $551,766 $9,740 -$40,277 -1.4% -11.7% 0.59 10.4% 60 First Colonial Bankshares Corp. FCOLA OTC 6/1/1986 N 2 13.4% $50,148 $5,257 14.2% 10.5% 0.54 0.9% 67 BankEast Corporation BENHQ OTC 12/1/1988 N 2 -1.8% $110,994 $53,337 -$15,337 44.5% -10.4% 0.37 6.2% 67 North Fork Bancorporation, Inc. NFB NYS 6/1/1991 N 2 21.1% $186,325 -$8,435 -1.9% 0.50 7.8% 13 Kelley Oil & Gas Corp. KOGC AMS 2/1/1995 N 2 21.0% $59,821 $88 -$24,957 -34.1% -41.7% 0.55 17.9% 38 CPAC, Inc. CPAK OTC 12/1/1995 Y 2 23.5% $58,630 $7,056 $5,267 10.3% 5.4% 0.36 0.9% 38 CPAC, Inc. CPAK OTC 10/1/1995 N 2 20.0% $58,630 $7,056 $5,267 10.3% 5.4% 0.35 0.9% 45 AirTran Corporation ATCC OTC 10/1/1993 N 2 18.3% $124,331 $21,324 $12,213 10.4% 5.4% 0.62 0.9% 67 Health Equity Properties Incorporated EQP NYS 8/1/1991 N 2 3.9% $18,108 $15,057 -$2,872 42.9% -15.9% 0.29 13.6% 62 Angeles Corporation ANG AMS 12/1/1982 N 2 28.0% $28,273 $7,362 $5,608 25.6% 11.0% 0.29 2.1% Two-Year Transactions—DividendsMedians 24 13.1% $117,663 $21,378 $9,304 22.5% 7.8% 0.37 2.4% Averages 13.2% $203,047 $45,632 $14,207 28.3% 8.2% 0.42 4.5% Minimums -8.7% $15,474 $88 -$40,277 -34.1% -41.7% 0.19 0.4% Maximums 38.0% $1,167,652 $228,620 $91,805 73.0% 66.9% 0.73 17.9% Two-Year Transactions—No DividendsMedians 220 21.9% $10,455 -$341 -$1,163 -7.5% -7.0% 0.73 0.0% Averages 23.0% $55,564 $6,292 -$3,776 -631.0% -623.0% 0.81 0.0% Minimums -29.5% $0 -$76,664 -$82,075 -52760.0% -52760.0% 0.19 0.0% Maximums 70.9% $1,791,446 $519,178 $18,271 29.3% 17.0% 7.24 0.0% 15March | April 2025 A Professional Development Journal for the Consulting DisciplinesThoughts on Dividend-Paying Companies I started with a figure indicating that the total return for an illiquid (or any) investment is the sum of the expected dividend yield and expected capital appreciation. For illiquid investments, these expectations are over the reasonably expected holding periods for investments. It is the expectation of future returns that give present value to investments. There is very little information about dividends in the FMV/ Stout Restricted Stock Database. The available information suggests that the presence of dividends, larger size, and better performance yielded lower RSDs for dividend-paying companies relative to those that did not pay dividends. The expectation of future dividends has an inverse relationship to marketability discounts. Some level of dividends in an investment would mitigate the marketability discount for otherwise similar investments with no dividends. The expectation of larger future dividends relative to smaller future dividends would mitigate the marketability discount for the higher-dividend-paying investment. This is just common sense. Unfortunately, in large part, the business valuation profession has ignored this commonsense analysis when 8 Shannon Pratt, Valuing a Business: The Analysis and Appraisal of Closely Held Companies (Dow Jones-Irwin, 1981). 9 Mercer and Harms, Business Valuation: An Integrated Theory, 3rd ed. estimating marketability discounts since Shannon Pratt reported on four restricted stock studies in his first (1981) edition of Valuing a Business . 8 Any study or analysis that does not directly consider the impact of expected future dividends on the value of illiquid minority interests of companies is flawed. Readers who have made it this far are directed to the earlier portion of this part of the Déjà vu series. A more in-depth resource would be the third edition of Business Valuation: An Integrated Theory. 9 Conclusion I close with something of an analogy. Estimating the value of illiquid minority interest using restricted stock studies (i.e., estimating the marketability discount) is like estimating the value of a business without considering the expected future income stream. As discussed above, there is no information in any restricted stock study to help business valuators estimate the value of expected future dividends. And what about the terminal value that gives rise to capital appreciation? That is also an expected future cash flow. It is time for many valuators to rethink their methods for developing marketability discounts. Z. Christopher Mercer, FASA, CFA, ABAR, is the founder and chairman of Mercer Capital, a national business valuation and financial advisory firm that is owned and managed by its employees through the Mercer Capital ESOP. He has valued businesses in many industries for numerous purposes. He has testified at deposition or trial in more than 20 states on matters pertaining to statutory fair value, business valuation, economic damages, marital dissolution, ESOPs, and other purposes. Mr. Mercer has written numerous books and many articles on valuation and related topics, and speaks frequently at conferences of business appraisers, attorneys, accountants, financial planners, and business owners. He splits his time between his homes in Memphis, where he works at Mercer Capital’s headquarters, and Daytona Beach Shores, Florida, where he has a home office. Mr. Mercer walks at least five miles each day and is an avid participant in the growing sport of pickleball. Email: mercerc@mercercapital.com. Any study or analysis that does not directly consider the impact of expected future dividends on the value of illiquid minority interests of companies is flawed. 16The Value Examiner Valuation*Pre-Conference Tri-Annual Recertification Day September 10, 2025 Super Conference September 11–12, 2025 September 2025 | Salt Lake City, UT | Hyatt Regency A La Carte Super Conference *Pre-Conference courses are not included in full Super Conference registration, require additional fees, and are not subject to early registration or multiple-attendee discounts. Early Registration and Multiple-Attendee Discounts Available REGISTRATION FEES To learn more and register, visit www.NACVA.com/Conferences or call Member/Client Services at (800) 677-2009 SUPER CONFERENCE BUSINESS VALUATION FINANCIAL LITIGATION One-Hour Sessions $93 Members $103 Non-Members Two-Hour Sessions $185 Members $206 Non-Members Full Super Conference (In-Person or Virtual) (includes up to 20 hours of CPE) $1,750 Members $1,945 Non-Members &Value Creation Strategies: Improving Product or Service Value Propositions Before Selling a Business By Kipp A. Krukowski, PhD, ASA, CVA I ask the owner to tell me in his/her words, “why does someone choose to do business with you over all the other choices available?” Often the answer is a boring, generic one like “our customer service, our quality, blah, blah.” I point out that their competitors are likely saying the same thing. I keep asking the question in a different way to determine what the company does differently and what causes its customers to choose it and to continue to choose it over time. I use this information when preparing the valuation when comparing to peers and for the selling memorandum. – Business Advisor Respondent #36 18The Value Examiner ValuationAt the heart of every business is a product or service offering that delivers a value proposition to its customers. Successful companies identify unmet customer needs and craft value propositions that offer unique solutions, allowing them to grow and retain customers as they mature. However, businesses operate in dynamic landscapes with ever-changing macro environmental factors and economic, industry, and market pressures. 1 For example, inflation or rising raw material prices may affect direct production costs or overhead. Price wars among competitors, or new substitute products, may result in decreased demand. Trade policies, tariffs, or geopolitical tensions may affect supply chains. New laws and regulations may alter purchasing decisions. Advancements in technology may tweak the competitive marketplace. These factors may alter the price and deliverability of a product or service, ultimately affecting a customer’s perceived value. Value propositions that once drove business success may not be desirable or sustainable in current and future environments. Intermediaries, exit planners, and other business advisors have a unique opportunity to counsel business owners, gaining exposure to the many situations businesses face. In addition, these advisors gain competitive insights into effective business model strategies used to gain and maintain traction. Business models are generally built on four main foundational pillars: the offering, infrastructure, customers, and financial viability. The offering is at the core, 2 and the value proposition resides within it. Value propositions may be “quantitative (e.g., price, speed of service) or qualitative (e.g., design, customer experience),” satisfying customer needs that either were not previously satisfied due to the newness of a problem or were not sufficiently addressed due to subpar service from other providers. 3 Regular evaluations of product and service offerings, taking into account the forces described above, help assure that a business owner has a salable business at the time of exit. To gain insight into specific value creation opportunities related to the value proposition, I conducted a research study involving seasoned exit planning advisors and business intermediaries. The overall study was designed to uncover expert value creation strategies within the business model for evaluating the offering, infrastructure, customers, 1 Kathleen R. Allen, Launching New Ventures: An Entrepreneurial Approach (Cengage Learning, 2015). 2 Heidi M. Neck, Christopher P. Neck, and Emma L. Murray, Entrepreneurship: The Practice and Mindset (Sage publications, 2019). 3 Alexander Osterwalder and Yves Pigneur, Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers, vol. 1 (John Wiley & Sons, 2010), 23. 4 Kipp A. Krukowski, “Business Advisor and Dealmaker Testimonies: Deficiencies in Privately Held Small Businesses Leading to Failed M&A Transactions,” The Value Examiner, July/August 2024; Kipp A. Krukowski, “Examining the Business Model: Value Creation Strategies for Improving Financial Viability Before Selling,” The Value Examiner, September/October 2024; Kipp A. Krukowski, “Value Creation Strategies: Improving Company Infrastructure Before Selling a Business,” The Value Examiner, November/December 2024; Kipp A. Krukowski, “Value Creation Strategies: Improving Customer Segments, Channels, and Relationships Before Selling a Business,” The Value Examiner, January/February 2025. and financial viability, as well as to uncover deficiencies in small businesses in advance of selling a business. 4 The research applied a qualitative approach rooted in grounded theory. It delved into the perspectives of 50 certified intermediaries and exit planning professionals who provided their insights through open-ended responses to questions focused on strategies for enhancing client value. These participants had an average of 15 years of experience in small business mergers and acquisitions advisory roles. I employed the Qualtrics platform to systematically record the responses, which were anonymized and encoded to ensure confidentiality, and assigned a distinct code, BA01–BA50, to each participant. Participants received a $50 honorarium to compensate them for the time they spent on the survey, which averaged 40 minutes. Participants were also questioned regarding the frequency with which they suggest value creation strategies related to the offering and time it took for those strategies to produce measurable impacts. Surprisingly, a significant number of business advisors (42 percent) answered “always” to the question, “When you work with a business owner to help prepare for their transfer of ownership, how often do you offer value creation suggestions for improving elements of the business’s value proposition?” At first blush, it may seem that modifying this component of the business model would be more difficult than modifying other areas of the business model. After all, value propositions related to products or services go to the core of a business’s identity. However, an examination of the participants’ qualitative responses reveals that value creation opportunities within the offering are plentiful, and many of these opportunities would not require significant pivots or expense, and would not be difficult to implement. Regarding the timing of valuation creation strategies, participants were asked, “Generally, how many months, on average, are needed to implement and observe measurable impacts of value creation suggestions related to value propositions?” The participants’ answers indicate that the time needed to realize results varies. This variation is likely due to differences in the scope of the value creation strategies suggested by the business advisors. The answers to the two questions described above are summarized in Figures 1 and 2. 19March | April 2025 A Professional Development Journal for the Consulting DisciplinesNext >