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State of the industry: BerryDunn's business valuation quarterly report

Our perspective on 1Q 2024 

By: Casey Karlsen,

Lexi Dysinger, CVA is a Senior Valuation Analyst in BerryDunn’s Valuation Services Practice Group. She provides analysis for valuations for gifting, estate planning, ESOPs, transaction support, and other purposes. She holds a Bachelor of Business Administration in Finance from Stetson University.

Lexi Dysinger

There’s an old folk story about two men who had a contest to see who could cut the most firewood in a day. One of the men, an energetic young man, was confident he would be the winner. Much to his surprise, his opponent, a wise old man, bested him. “How did you beat me? I saw you taking all those breaks in the shade of that tree!” the young man exclaimed. The wise old man chuckled and said, “What breaks? I was sharpening my axe!”

Summer is when we sharpen our axes. For the valuation team, the year typically gets off to a busy start with ESOP clients looking for an updated share price. Additionally, many business owners began making decisions—buying or selling companies and planning for ownership transitions—in the spring after reviewing financial results for the prior year.

By summer, this activity is winding down. Things never quite get slow, but in the summertime, we make time to set ourselves up for sustainability during the busy times. Our summers are full of training analysts, getting acquainted with future talent through our intern program, refining templates, and exploring new ways to help our clients create, grow, and protect value.

We also spend a little more time digesting economic trends and forecasts and considering what implications these variables may have on business value.

We track trends in several databases of private company transactions, among them GF Data, Capital IQ, DealStats, and BIZCOMPS. As presented below, transaction volume normalized following a decrease in interest rates. Transaction volume peaked in the last quarter of 2021.1

Don’t get too fixated on the multiples in this chart as an indicator of value for your company. Look at the trends. Multiples vary dramatically from industry to industry and business to business. If you are interested in exploring value drivers for your company, read this recent article.  

1Used with permission from GF Data Resources, LLC. All recipients of this Quarterly Valuation Update agree to be subject to and comply with GF Data’s Terms of Use.

The value of privately held companies typically isn’t as volatile as share prices for public companies. However, activity in the stock market provides general guidance that is often much timelier than data available for private companies.  

There are a few indexes we keep an eye on. Although the S&P 500 is dominated by a handful of large tech stocks, it is generally considered the go-to benchmark for stock market performance. The Russell Midcap Index cuts out the largest 200 companies in the Russell 1000 Index, keeping 800 US companies with market capitalizations between $2 billion and $10 billion. The Dow Jones Industrial Average is comprised of 30 “blue chip” US stocks that may be similar to many private companies.  

After rebounding from a decline in November and December of 2023, stock prices have continued to rise throughout the first quarter of 2024.

Many drivers of business value can be influenced or controlled by the decisions of the business’s management team, including: product diversification, brand recognition, and employee retention. Other drivers are outside of management’s control, such as inflation and unemployment rates. Below is a table summarizing several key drivers of the US economy.2

2 Source: Federal Reserve Economic Data, available at

As many of our clients are located in New England, we’ve included a summary below of some of the key economic drivers that affect businesses in the Northeast. If your business is headquartered outside of New England, reach out to us for an economic analysis specific to your market area. 

Economic activity  

Business activity expanded at a modest pace in recent weeks, prices rose slightly, and employment was flat overall. Convention and tourism activity grew at a robust pace, but retail sales increased only modestly. Manufacturers reported slight revenue growth, while software and IT services firms had flat revenues recently despite strong year-over-year growth in sales. Residential home sales increased by moderate margins from a year earlier, the first such increase in over two years. Activity in the commercial real estate sector—including construction—picked up slightly, on balance. The sector’s outlook also improved a bit, but the risk of financial distress for large office buildings remained elevated. In other sectors, contacts ranged from cautiously optimistic to bullish concerning the outlook, largely in line with the strength of their own recent results.

Labor markets  

Employment was unchanged overall, but labor market conditions were mixed. One large retailer enacted substantial layoffs in a bid to boost profitability, but no other contacts (in any sector) reported layoffs. Restaurant employment increased modestly on the strength of sustained demand and increased supply. Tourism-related employment in greater Boston was flat as firms struggled to reach desired staffing levels. Employers on Cape Cod also faced challenges filling jobs as rising housing costs priced more workers out of the Cape. Software and IT employment increased slightly, and manufacturing employment was flat or down slightly where there was attrition. Wages increased at a moderate pace on average. Contacts did not expect major changes in labor market conditions moving forward, although tourism contacts hoped that an upcoming career fair would help attract more workers for the busy summer season.


Prices increased only slightly overall. Retailers reported modest input price increases, and one remarked that recent shipping disruptions overseas had not yet affected its suppliers. Hotel room rates in greater Boston were stable recently, net of seasonal factors, and were up moderately from a year earlier, marking a notably slower pace of growth compared with 2023. Nightly room rates on Cape Cod were flat compared with last year. Software and IT services prices were stable. Manufacturers mostly held prices steady, but some reduced their output prices (either slightly or moderately) in response to declining input prices; those experiencing cost increases, by contrast, reported that they had raised prices moderately. For the most part, the outlook called for slow further price growth moving forward. However, one manufacturing contact, having held prices steady over an extended period, was considering a significant price increase to compensate for accumulated cost pressures.

Retail and tourism 

First District5 retail and tourism contacts reported a moderate upswing in sales in the first quarter of 2024 from late 2023, net of seasonal factors. An online retailer boosted its market share and experienced modest revenue growth despite sluggish industrywide performance. Airline passenger traffic through Boston increased at an above-average pace in recent months, with total passengers now exceeding pre-pandemic levels. Domestic travel remained below pre-pandemic levels because of the incomplete recovery of business travel, but growth in international travel more than compensated. Hotel occupancy in greater Boston increased at a strong pace, exceeding seasonal norms, fueled in part by robust convention activity and sporting events. On Cape Cod, retailers and hoteliers said revenues were on par with one year earlier, a modest improvement from the previous report. The outlook for tourism and convention activity in 2024 remained very bullish, and Cape Cod hotel bookings for the remainder of the year looked on track to match those from 2023. In contrast, retailers were only cautiously optimistic.

5 The Federal Reserve System’s First District includes Connecticut (excluding Fairfield County), Massachusetts, Maine, New Hampshire, Rhode Island, and Vermont.

Manufacturing and related services 

Manufacturing revenues were about flat on balance, with half of contacts reporting moderate gains in sales over the cycle and the other half experiencing moderate losses. Capital expenditures were mostly unchanged but on balance exceeded typical levels, as two firms were in the process of expanding or upgrading their plants. Contacts were uniformly optimistic for the remainder of 2024, projecting steady to moderately higher sales moving forward; in one case, however, that still meant that total sales in 2024 would fall short of their 2023 levels. The positive forecasts were based largely on firms’ own recent demand trends, but one contact cited the prospects of productivity gains from AI and expected cuts in the federal funds rate as additional sources of optimism.

IT and software services 

Contacts in IT and software services said that demand and revenues were mostly stable in recent months. On a year-over-year basis, revenues increased by moderate to large margins for all firms. Those latter growth rates were about on par with those of the previous quarter and exceeded expectations in one case. Furthermore, the growth was attributed to factors that had boosted real demand, such as the transition to subscription-based business models. Capital and technology spending was unchanged, and no future changes were anticipated. Contacts expected demand to hold fairly steady at strong levels in the next quarter. One contact noted that the time required to close deals had increased of late, but the implications for their revenues were not yet clear.

Commercial real estate 

Commercial real estate activity in the First District increased slightly on balance since February. Industrial leasing activity slowed a bit due to a lack of inventory, and industrial rents faced slight upward pressure. In the office market, leasing activity held mostly steady at a slow pace, but one Boston contact detected a modest increase in tenant demand; office rents were mostly stable but fell slightly for lower-quality spaces. Leasing activity strengthened modestly for retail properties, with deals concentrated in restaurant- and grocery-anchored centers. Construction activity picked up a bit, primarily in the industrial market but also for retail and hospitality projects. Contacts noted an uptick in refinancing activity for office properties with maturing loans, but borrowers often had to add equity. The investment sales market was nonetheless still “frozen,” as investors waited for interest rates to come down, and large banks remained on the side lines. The outlook improved modestly, as contacts expected leasing activity to either hold steady or increase by late 2024, including for small-to-medium sized office buildings. Contacts remained concerned that certain office properties faced elevated foreclosure risks.

Residential real estate 

For the first time in over two years, residential home sales increased on a year-over-year basis in all First District states that were contacted (Connecticut furnished no data). Closed single-family sales increased at a moderate pace on average (from February 2023 through February 2024) and were led by robust gains in Vermont, Maine, and Rhode Island. Condominium sales fared even better than single-family sales over the same period, with strong overall growth and very large increases in those same three states. Massachusetts posted only modest increases in home sales, although greater Boston had above-average results within the state. Contacts attributed the stronger sales to a combination of recent declines in mortgage rates and increases in property listings but emphasized that inventories remain well below desired levels. Home prices increased at a strong pace from one year earlier, similar to what was last reported. Contacts were optimistic for a strong spring buying season, provided the tight inventory situation showed further improvement.

  • To learn more about ESOPs, here is a brief overview of ESOPs we put together. 
  • Interested in learning more about business valuations? Pick up a copy of our book, A Field Guide to Business Valuation.
  • Today’s business reading, suggested by analyst José Calvo, is Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne. 

Where to find us

Cameron Scott will be attending the 2024 FOX Family Office & Wealth Advisor Forum in Chicago on July 15th through July 17th.

Seth Webber and Casey Karlsen will be presenting a webinar titled “Exit Planning: Helping Business Owners Increase Value and Liquidity” through Business Valuation Resources on August 6th at 1 pm ET. 

Meridith Byrne and Seth Webber will be attending the New England Chapter of The ESOP Association’s Fall Conference in Springfield, Massachusetts on October 15th and October 16th.

Casey Karlsen will be presenting a session titled “Exit Planning and Value Acceleration” at the Maine Tax Forum on November 7th.

Interested in meeting the team? Please reach out to us. We would love to connect. 

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Lexi Dysinger, CVA is a Senior Valuation Analyst in BerryDunn’s Valuation Services Practice Group. She provides analysis for valuations for gifting, estate planning, ESOPs, transaction support, and other purposes. She holds a Bachelor of Business Administration in Finance from Stetson University.

Lexi Dysinger

I leaned out of my expansive corner office (think: cubicle) and asked my coworker Andrew about an interesting topic I had been thinking about. “Hey Andrew, do you know what BATNA stands for?” I asked. Andrew, who knows most things worth knowing, indicated that he didn’t know. This felt good, as there are very few things that I know that Andrew doesn’t. 

BATNA, which stands for “best alternative to no agreement”, is very relevant to business owners who may at some point want to sell their business. It’s a relatively simple concept with significant implications in the context of negotiations, as the strength of your negotiating position depends on what happens if the deal falls through (i.e., if there is no agreement). Put another way, your negotiating position is dependent on your "next best alternative", but I’m pretty sure the acronym NBA is already being used.

If you have 100 potential buyers lined up, you have a strong negotiating position. If the first buyer backs out of the deal, you have 99 alternatives. But if you have only one potential buyer lined up, you have a weak negotiating position. Simple, right?

BATNA is applicable to many areas of our life: buying or selling a car, negotiating the price of a house, or even choosing which Netflix show to watch. Since I specialize in valuations, let’s talk about BATNA and valuations, and more specifically, fair market value versus investment value.

Fair Market Value

The International Glossary of Business Valuation Terms defines fair market value as “the price, expressed in terms of cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arm’s length in an open and unrestricted market, when neither is under compulsion to buy or sell and when both have reasonable knowledge of the relevant facts.”

Think about fair market value as the price that I would pay for, for example, a Mexican restaurant. I have never owned a Mexican restaurant, but if the restaurant generates favorable returns (and favorable burritos), I may want to buy it. Fair market value is the price that a hypothetical buyer such as myself would pay for the restaurant. 

Investment Value

The International Glossary of Business Valuation Terms defines investment value as “the value to a particular investor based on individual investment requirements and expectations.”

Think about investment value as the price that the owner of a chain of Mexican restaurants would pay for a restaurant to add to their portfolio. This strategic buyer knows that because they already own a chain of restaurants, when they acquire this restaurant, they can reduce overhead, implement several successful marketing strategies, and benefit from other synergies. Because of these cost savings, the restaurant chain owner may be willing to pay more for the restaurant than fair market value (what I would be willing to pay). As this example illustrates, investment value is often higher than fair market value.

As a business owner you may conclude “Well, if investment value is higher than fair market value, I would like to sell my business for investment value.” I agree. I absolutely agree. Unfortunately, obtaining investment value is not a guaranteed thing because of… you guessed it! BATNA. 

Business owners may identify a potential strategic buyer and hope to obtain investment value in the sale. However, in reality, unless the business owner has identified a ready pool of potential strategic buyers (notice the use of the plural here), they may not be in a negotiating position to command investment value. A potential strategic buyer may realize if they are the only potential strategic buyer of a company, they aren’t competing against anybody offering more than fair market value for the business. If there isn’t any agreement, the business owner’s best alternative is to sell at fair market value. Realizing this, a strategic buyer will likely make an offer for less than investment value. 

If you are looking to sell your business, you need to put yourself in a negotiating position to command a premium above fair market value. You need to identify as many potential buyers as possible. With multiple potential strategic buyers identified, your BATNA is investment value. You will have successfully shifted the focus from a competition for your business to a competition among strategic buyers. Now, the strategic buyers will be concerned with their own BATNA, rather than yours. And that’s a good thing.

We frequently encounter clients surprised by the difficulty of commanding investment value for the sale of their business. BATNA helps explain why business owners are unable to attain investment value. 

At BerryDunn, we perform business valuations under both the investment value standard and the fair market value standard.

If you have any questions about the value of your business, please contact a professional on our business valuation team

BATNA: What you need to know

Executive compensation, bonuses, and other cost structure items, such as rent, are often contentious issues in business valuations, as business valuations are often valued by reference to the income they produce. If the business being valued pays its employees an above-market rate, for example, its income will be depressed. Accordingly, if no adjustments are made, the value of the business will also be diminished.

When valuing controlling ownership interests, valuation analysts often restate above- or below-market items (compensation, bonuses, rent, etc.) to a fair market level to reflect what a hypothetical buyer would pay. In the valuation of companies with ESOPs, the issue gets more complicated. The following hypothetical example illustrates why.

Glamorous Grocery is a company that is 100% owned by an ESOP. A valuation analyst is retained to estimate the fair market value of each ESOP share. Glamorous Grocery generates very little income, in part because several executives are overcompensated. The valuation analyst normalizes executive compensation to a market level. This increases Glamorous Grocery’s income, and by extension the fair market value of Glamorous Grocery, ultimately resulting in a higher ESOP share value.

Glamorous Grocery’s trustee then uses this valuation to establish the market price of ESOP shares for the following year. When employees retire, Glamorous Grocery buys employees out at the established share price. The problem? As mentioned before, Glamorous Grocery generates very little income and as a result has difficulty obtaining the liquidity to buy out employees.

This simple example illustrates the concerns about normalizing executive compensation in ESOP valuations. If you reduce executive compensation for valuation purposes, the share price increases, putting a heavier burden on the company when you redeem shares. The company, which already has reduced income from paying above-market executive compensation, may struggle to redeem shares at the established price.

While control-level adjustments may be common, it is worth considering whether they are appropriate in an ESOP valuation. It is important that the benefit stream reflect the underlying economic reality of the company to ensure longevity of the company and the company’s ESOP.

Questions? Our valuation team will be happy to help. 

BerryDunn’s Business Valuation Group partners with clients to bring clarity to the complexities of business valuation, while adhering to strict development and reporting standards. We render an independent, objective opinion of your company’s value in a reporting format tailored to meet your needs. We thoroughly analyze the financial and operational performance of your company to understand the story behind the numbers. We assess current and forecasted market conditions as they impact present and future cash flows, which in turn drives value.

Compensation, bonuses, and other factors that can make or break an Employee Stock Ownership Plan (ESOP)

Do you know what would happen to your company if your CEO suddenly had to resign immediately for personal reasons? Or got seriously ill? Or worse, died? These scenarios, while rare, do happen, and many companies are not prepared. In fact, 45% of US companies do not have a contingency plan for CEO succession, according to a 2020 Harvard Business Review study.  

Do you have a plan for CEO succession? As a business owner, you may have an exit strategy in place for your company, but do you have a plan to bridge the leadership gap for you and each member of your leadership team? Does the plan include the kind of crises listed above? What would you do if your next-in-line left suddenly? 

Whether yours is a family-owned business, a company of equity partners, or a private company with a governing body, here are things to consider when you’re faced with a situation where your CEO has abruptly departed or has decided to step down.  

1. Get a plan in place. First, assess the situation and figure out your priorities. If there is already a plan for these types of circumstances, evaluate how much of it is applicable to this particular circumstance. For example, if the plan is for the stepping down or announced retirement of your CEO, but some other catastrophic event occurs, you may need to adjust key components and focus on immediate messaging rather than future positioning. If there is no plan, assign a small team to create one immediately. 

Make sure management, team leaders, and employees are aware and informed of your progress; this will help keep you organized and streamline communications. Management needs to take the lead and select a point person to document the process. Management also needs to take the lead in demeanor. Model your actions so employees can see the situation is being handled with care. Once a strategy is identified based on your priorities, draft a plan that includes what happens now, in the immediate future, and beyond. Include timetables so people know when decisions will be made.  

2. Communicate clearly, and often. In times of uncertainty, your employees will need as much specific information as you can give them. Knowing when they will hear from you, even if it is “we have nothing new to report” builds trust and keeps them vested and involved. By letting them know what your plan is, when they’ll receive another update, what to tell clients, and even what specifics you can give them (e.g., who will take over which CEO responsibility and for how long), you make them feel that they are important stakeholders, and not just bystanders. Stakeholders are more likely to be strong supporters during and after any transition that needs to take place. 

3. Pull in professional help. Depending on your resources, we recommend bringing in a professional to help you handle the situation at hand. At the very least, call in an objective opinion. You’ll need someone who can help you make decisions when emotions are running high. Bringing someone on board that can help you decipher what you have to work with and what your legal and other obligations may be, help rally your team, deal with the media, and manage emotions can be invaluable during a challenging time. Even if it’s temporary. 

4. Develop a timeline. Figure out how much time you have for the transition. For example, if your CEO is ill and will be stepping down in six months, you have time to update any existing exit strategy or succession plan you have in place. Things to include in the timeline: 

  • Who is taking over what responsibilities? 
  • How and what will be communicated to your company and stakeholders? 
  • How and what will be communicated to the market? 
  • How will you bring in the CEO's replacement, while helping the current CEO transition out of the organization? 

If you are in a crisis situation (e.g., your CEO has been suddenly forced out or asked to leave without a public explanation), you won’t have the luxury of time.  

Find out what other arrangements have been made in the past and update them as needed. Work with your PR firm to help with your change management and do the right things for all involved to salvage the company’s reputation. When handled correctly, crises don’t have to have a lasting negative impact on your business.   

5. Manage change effectively. When you’re under the gun to quickly make significant changes at the top, you need to understand how the changes may affect various parts of your company. While instinct may tell you to focus externally, don’t neglect your employees. Be as transparent as you possibly can be, present an action plan, ask for support, and get them involved in keeping the environment positive. Whether you bring in professionals or not, make sure you allow for questions, feedback, and even discord if challenging information is being revealed.  

6. Handle the media. Crisis rule #1 is making it clear who can, and who cannot, speak to the media. Assign a point person for all external inquiries and instruct employees to refer all reporter requests for comment to that point person. You absolutely do not want employees leaking sensitive information to the media. 
With your employees on board with the change management action plan, you can now focus on external communications and how you will present what is happening to the media. This is not completely under your control. Technology and social media changed the game in terms of speed and access to information to the public and transparency when it comes to corporate leadership. Present a message to the media quickly that coincides with your values as a company. If you are dealing with a scandal where public trust is involved and your CEO is stepping down, handling this effectively will take tact and most likely a team of professionals to help. 

Exit strategies are planning tools. Uncontrollable events occur and we don’t always get to follow our plan as we would have liked. Your organization can still be prepared and know what to do in an emergency situation or sudden crisis.  Executives move out of their roles every day, but how companies respond to these changes is reflective of the strategy in place to handle unexpected situations. Be as prepared as possible. Own your challenges. Stay accountable. 

BerryDunn can help whether you need extra assistance in your office during peak times or interim leadership support during periods of transition. We offer the expertise of a fully staffed accounting department for short-term assignments or long-term engagements―so you can focus on your business. Meet our interim assistance experts.

Crisis averted: Why you need a CEO succession plan today

Read this if your CFO has recently departed, or if you're looking for a replacement.

With the post-Covid labor shortage, “the Great Resignation,” an aging workforce, and ongoing staffing concerns, almost every industry is facing challenges in hiring talented staff. To address these challenges, many organizations are hiring temporary or interim help—even for C-suite positions such as Chief Financial Officers (CFOs).

You may be thinking, “The CFO is a key business partner in advising and collaborating with the CEO and developing a long-term strategy for the organization; why would I hire a contractor to fill this most-important role?” Hiring an interim CFO may be a good option to consider in certain circumstances. Here are three situations where temporary help might be the best solution for your organization.

Your organization has grown

If your company has grown since you created your finance department, or your controller isn’t ready or suited for a promotion, bringing on an interim CFO can be a natural next step in your company’s evolution, without having to make a long-term commitment. It can allow you to take the time and fully understand what you need from the role — and what kind of person is the best fit for your company’s future.

BerryDunn's Kathy Parker, leader of the Boston-based Outsourced Accounting group, has worked with many companies to help them through periods of transition. "As companies grow, many need team members at various skill levels, which requires more money to pay for multiple full-time roles," she shared. "Obtaining interim CFO services allows a company to access different skill levels while paying a fraction of the cost. As the company grows, they can always scale its resources; the beauty of this model is the flexibility."

If your company is looking for greater financial skill or advice to expand into a new market, or turn around an underperforming division, you may want to bring on an outsourced CFO with a specific set of objectives and timeline in mind. You can bring someone on board to develop growth strategies, make course corrections, bring in new financing, and update operational processes, without necessarily needing to keep those skills in the organization once they finish their assignment. Your company benefits from this very specific skill set without the expense of having a talented but expensive resource on your permanent payroll.

Your CFO has resigned

The best-laid succession plans often go astray. If that’s the case when your CFO departs, your organization may need to outsource the CFO function to fill the gap. When your company loses the leader of company-wide financial functions, you may need to find someone who can come in with those skills and get right to work. While they may need guidance and support on specifics to your company, they should be able to adapt quickly and keep financial operations running smoothly. Articulating short-term goals and setting deadlines for naming a new CFO can help lay the foundation for a successful engagement.

You don’t have the budget for a full-time CFO

If your company is the right size to have a part-time CFO, outsourcing CFO functions can be less expensive than bringing on a full-time in-house CFO. Depending on your operational and financial rhythms, you may need the CFO role full-time in parts of the year, and not in others. Initially, an interim CFO can bring a new perspective from a professional who is coming in with fresh eyes and experience outside of your company.

After the immediate need or initial crisis passes, you can review your options. Once the temporary CFO’s agreement expires, you can bring someone new in depending on your needs, or keep the contract CFO in place by extending their assignment.

Considerations for hiring an interim CFO

Making the decision between hiring someone full-time or bringing in temporary contract help can be difficult. Although it oversimplifies the decision a bit, a good rule of thumb is: the more strategic the role will be, the more important it is that you have a long-term person in the job. CFOs can have a wide range of duties, including, but not limited to:

  • Financial risk management, including planning and record-keeping
  • Management of compliance and regulatory requirements
  • Creating and monitoring reliable control systems
  • Debt and equity financing
  • Financial reporting to the Board of Directors

If the focus is primarily overseeing the financial functions of the organization and/or developing a skilled finance department, you can rely — at least initially — on a CFO for hire.

Regardless of what you choose to do, your decision will have an impact on the financial health of your organization — from avoiding finance department dissatisfaction or turnover to capitalizing on new market opportunities. Getting outside advice or a more objective view may be an important part of making the right choice for your company.

BerryDunn can help whether you need extra assistance in your office during peak times or interim leadership support during periods of transition. We offer the expertise of a fully staffed accounting department for short-term assignments or long-term engagements―so you can focus on your business. Meet our interim assistance experts.

Three reasons to consider hiring an interim CFO