How big is the business valuation profession? New data from the 2011 BV Firm Economics Guide


Total business valuation revenues generated by the respondent’s firms appear in the table below--and it points out the fact that the business valuation profession is comprised of widely divergent practices.

The total business valuation revenues earned by firms participating in this year’s 2011 BV Firm Economics & Best Practices Guide was $685 million.  The editors project, 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 2007, and, despite the downturn, has grown to nearly $1.6 billion now (for comparison, total U.S. film industry revenues in 2010 are estimated to be $20 billion, while the market for U.S. legal services is estimated at $235 billion last year).  The analysis behind this forecast is fraught with estimates, but it seems worthwhile in any case because no one has tried to estimate the size of the business valuation profession previously. Whatever the margin of error, two facts emerge from this estimate:  1) the business valuation profession is substantial, and 2) despite the difficult economy, it’s continuing to grow rapidly, particularly among the larger firms.

A clear migration to larger practice units. Just over 30% of the firms brought in less than $100,000 in BV revenues two years ago; only a quarter did in 2010.  These small practices are often associated with CPA firms, where one BV partner does valuations “part-time,” sometimes at fees below market.  In 2006, this number was 33.7%--so there appears to be a slight reduction in the number of small practices—a trend noted elsewhere as it becomes increasingly difficult to manage risk and quality control for anything less than full-time BV practices.  (Four respondents to the survey this year stated they had “left the practice” in 2010 as parttimers—the results from these individuals were not included in any of the calculations in this Guide.)

Largest firms. At the other end of the spectrum, seven responding firms who reported usable data now claim over $10 million in BV revenues.  In this “biggest BV firm” group were two of the Big 4, two non-Big 4 national CPA firms, two international valuation firms, and one “other prime business” firm.

The median responding firm in the 2011 Guide had $251,000 in business valuation revenues (up from $211,000 in 2008), however--reminding all of us that this is primarily a profession of solo practitioners and small practice units.  The mean average, driven higher by the larger firms, was $1, 214,000.  (Note:  we omitted responses from firms that did not provide both total BV revenues, and total revenues—and several outlier data points, including several startups with improbable results, and four responses from large transactional firms who claimed that the majority of their revenues came from BV work.)

The Guide will be available at the end of the month.

What were your total business valuation revenues for the last year available?

2010

2008
< $100K 24.5% 30.7%
$100-199K 14.4% 18.0%
$200-$499K 25.6% 22.5%
$500-999K 12.9% 9.0%
$1MM-$1.99M 11.5% 7.9%
$2MM-$9.99M 9.6% 9.7%
>$10M 1.5%

2.2%


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