Gaming and lotteries

Read this if you are a business owner or an advisor to business owners.

This article is part one of a three-part series. 

With continued uncertainty in the business environment—driven by shifting economic conditions, market volatility, and evolving tax policy—now may be a good time to utilize trust, gift, and estate strategies in the transfer of privately held business interests. Periods of uncertainty can create an opportunity to free up considerable portions of lifetime gift and estate tax exemption amounts through transfers, particularly as uncertainty and increased risk serve to reduce business valuations.  

An element to consider is the ability to transfer noncontrolling interests in a business. These interests are potentially subject to Discounts for Lack of Control (DLOC) and lack of marketability. This may further reduce the overall value transferred through a given strategy, potentially offloading a larger percentage of ownership in a business while retaining large portions of the gift and estate lifetime exemption. For the first part of this series, we’ll focus on the DLOC.

What is discount for lack of control?

In the context of a hypothetical willing buyer and willing seller, the buyer may place a greater value on an ownership interest with the ability to make changes at their discretion, compared to an alternative ownership interest lacking control. Simply put, buyers like to be in control, and they will pay less for the investment if the interest lacks these characteristics.  

When valuing noncontrolling business interests, there is an inherent discount to full value recognized to reflect the fact that the subject interest does not hold a controlling position. As a result of this discount, the value of a noncontrolling interest in a company will differ from the pro-rata value per share of the entire company. DLOCs alone commonly reduce the value of the transferred interest by 5% to 15%. 

All else being equal, a noncontrolling ownership position is less desirable (valuable) than a controlling position. This is because of the majority owner’s right to control any or all of the following activities:

• Managing the assets or selecting agents for this purpose 
• Controlling major business decisions, asset allocation choices, setting salary levels, admitting new investors, acquiring assets, selling the company, and declaring/paying distributions

Market-based evidence of proxies for DLOCs can be found within the following subscription-based databases, including but not limited to: 

• Control premium studies published in the Mergerstat^® Review series by FactSet Mergerstat/Business Valuation Resources
• Closed-end fund data
• The Partnership Profiles, Inc. Minority Interest Database and Executive Summary Report on Re-Sale Discounts for applicable entity types

In addition to these resources, to fully assess the degree of discount applicable to a subject interest, consider company-specific factors when estimating the DLOC. The degree of control for a subject interest may be impacted by relevant state statutes and the governing documents of the subject company. These factors are analyzed in conjunction with the current operational and financial policies established and implemented in practice by management to establish a comprehensive view on the applicable degree of discount.

Hypothetical business owners are knowledgeable of the facts and circumstances surrounding a business interest. They take a close look at what they are buying before they make an offer. Like most owners, they prefer to be in control and are generally unwilling to pay the pro-rata value for a minority interest in a business that lacks control. To assess an appropriate discount for lack of control, consider resources such as those referred to above, then ensure the selected discounts are appropriate based on the factors specific to the company and interest being valued. 

Key takeaways

• Use periods of uncertainty to consider trust, gift, and estate strategies for transferring privately held business interests. 
• Recognize that noncontrolling interests may qualify for discounts for lack of control, reducing reported transfer value. 
• Define a DLOC as the price reduction buyers apply when an ownership stake cannot influence decisions or change operations. 
• Expect DLOCs alone to commonly reduce transferred-interest value by 5%–15%, making minority value differ from pro‑rata value. 
• Support a DLOC with market evidence (control premium studies, closed-end fund data, minority interest databases) and company-specific factors (state statutes, governing documents, operating policies). 

BerryDunn can help 

BerryDunn’s credentialed business valuation specialists bring clarity to the complexities of 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. If you have questions about your unique situation, or would like more information, please contact the business valuation consulting team. 

Read this if you are a business owner or an advisor to business owners.

This article is part two of a three-part series. 

With continued uncertainty in the business environment—driven by shifting economic conditions, market volatility, and evolving tax policy—now may be a good time to utilize trust, gift, and estate strategies in the transfer of privately held business interests. Periods of uncertainty can create an opportunity to free up considerable portions of lifetime gift and estate tax exemption amounts through transfers, particularly as uncertainty and increased risk serve to reduce business valuations. 

An element to consider is the ability to transfer noncontrolling interests in a business. These interests are potentially subject to discounts for lack of control and lack of marketability. This may further reduce the overall value transferred through a given strategy, potentially offloading a larger percentage of ownership in a business while retaining large portions of the gift and estate lifetime exemption. Part one of this series focused on the discount for lack of control. For part two, we'll focus on the discount for lack of marketability. 

Discount for lack of marketability

In the context of a hypothetical willing buyer and willing seller, the buyer may place a greater value on an ownership interest in an investment that is “marketable.” Marketable investments can be bought and sold easily and offer the ability to extract liquidity compared to an interest where transferability and marketability are limited. 

Simply put, buyers would rather own investments they can sell easily and will pay less for the investment if it lacks this ability. Noncontrolling interests in private businesses lack marketability—few people are interested in investing in a business where control rests in someone else’s hands. Discounts for lack of control commonly reduce the value of the transferred interest by 5% to 15%, while discounts for lack of marketability can drop the value of the business by 25% to 35%. 

Market-based evidence of proxies for discounts for lack of marketability can be found within the following resources, studies, and methods (including but not limited to): 

• Various restricted stock studies 
• The Quantitative Marketability Discount Model (QMDM) developed by Z. Christopher Mercer 
• Various pre-initial public offering studies 
• Option pricing models 
• Other discounted cash flow models 

In addition to these resources, to fully assess the degree of discount applicable to a subject interest, consider company-specific factors when estimating the discount for lack of marketability. The degree of marketability is dependent upon a wide range of factors, such as the payment of dividends, the existence of a pool of prospective buyers, the size of the interest, any restrictions on transfer, and other factors. 

Assessing discount for lack of marketability

To establish a comprehensive view on the applicable degree of discount, here are more things to consider. In a ruling on the case Mandelbaum v. Commissioner¹, Judge David Laro outlined the primary company-specific factors affecting the discount for lack of marketability, including:

1. Restrictions on transferability and withdrawal
2. Financial statement analysis
3. Dividend policy
4. The size and nature of the interest
5. Management decisions
6. Amount of control in the transferred shares

Business owners are knowledgeable of the facts and circumstances surrounding a business interest. They take a close look at what they are buying before they make an offer. Like most owners, they prefer investments they can readily convert into cash and are generally not willing to pay the pro-rata value for a minority interest in a business that lacks marketability. To assess an appropriate discount for lack of marketability, consider resources such as those referred to above, then ensure selected discounts are appropriate based on the factors specific to the company and interest being valued. 

Key takeaways

• Use periods of uncertainty to consider trust, gift, and estate strategies for transferring privately held business interests.  
• Recognize that noncontrolling interests may qualify for discounts for lack of marketability, reducing reported transfer value.  
• Expect marketability discounts to be materially larger than control discounts in many cases, potentially reducing value by roughly 25% to 35%. 
• Reference market-based studies and valuation models when estimating the discount. 
• Evaluate company-specific factors when determining the discount. 

BerryDunn can help 

Our credentialed business valuation specialists bring clarity to the complexities of 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. If you have questions about your unique situation, or would like more information, please contact the business valuation consulting team. 

¹Mandelbaum v. Commissioner, T.C. Memo 1995-255 (June 13, 1995).

Read this if you are a business owner or an advisor to business owners.

This article is part three of a three-part series. 

With continued uncertainty in the business environment—driven by shifting economic conditions, market volatility, and evolving tax policy—now may be a good time to utilize trust, gift, and estate strategies in the transfer of privately held business interests. Periods of uncertainty can create an opportunity to free up considerable portions of lifetime gift and estate tax exemption amounts through transfers, particularly as uncertainty and increased risk serve to reduce business valuations. 

An element to consider is the ability to transfer noncontrolling interests in a business. These interests are potentially subject to discounts for lack of control and lack of marketability. This may further reduce the overall value transferred through a given strategy, potentially offloading a larger percentage of ownership in a business while retaining large portions of the gift and estate lifetime exemption. Part one of this series focused on the discount for lack of control (DLOC) and part two focused on the discount for lack of marketability (DLOM). In part three, we’ll focus on the application of discounts. 

Application of discounts

One area that often challenges those unfamiliar with business valuations is the application of the DLOC and DLOM. These discounts are multiplicative, not additive. The combined effect of a 10% DLOC and a 30% DLOM is not an additive result of 40%, rather a multiplicative result of 37% (mathematically, 1 – [(1 – DLOC) x (1 – DLOM)]). Consider the following example:

A business owner has a 10% minority, nonmarketable interest in a business. The equity of the business is worth $1,000,000. Their interest has a pro-rata value of $100,000 (10% of $1,000,000). They retained a qualified valuation analyst, who estimated that a 10% discount for lack of control and a 30% discount for lack of marketability were appropriate for the valuation of the business owner’s interest. The difference in applying these discounts correctly through a multiplicative process and incorrectly through an additive process is demonstrated in the following chart: 

It does not matter the order in which a DLOC and a DLOM are applied. Because these discounts are multiplicative, applying either one first will not affect the concluded minority, nonmarketable value.

What this means for business owners 

Business owners are knowledgeable of the facts and circumstances surrounding a business interest. They take a close look at what they are buying before they make an offer. Like most owners, they prefer to maintain control and invest in assets that are readily convertible to cash. Therefore, they are generally not willing to pay the pro-rata value for a minority interest in a business that lacks control and marketability. To assess appropriate discounts for lack of control and discounts for lack of marketability, consider resources such as those referred to in part one and part two of this series, then ensure the selected discounts are appropriate based on the factors specific to the company and interest being valued. From there, the application of the DLOC and DLOM is multiplicative, not additive, as noted in the example above. 

Given the current environment, using trust, gift, and estate strategies that take advantage of discounts for lack of control and marketability offers the opportunity to transfer a higher percentage of interest in a privately held company at a lower value. This potentially frees up additional amounts of remaining thresholds of the lifetime gift and estate tax exemptions. 

Key takeaways

• Watch for market and tax uncertainty that can create transfer opportunities. 
• Identify noncontrolling interests that may qualify for valuation discounts. 
• Distinguish discounts for lack of control from discounts for lack of marketability. 
• Apply the two discounts multiplicatively rather than adding the percentages. 

BerryDunn can help 

BerryDunn’s credentialed business valuation specialists bring clarity to the complexities of 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. If you have questions about your unique situation, or would like more information, please contact the business valuation consulting team. 

Veterinary practice owners can miss important financial warning signs even when revenue is growing. This article explains 12 common blind spots, including weak cash flow visibility, outdated pricing, missed charges, labor inefficiencies, and limited long-term planning. Without financial visibility, practices risk lower profitability, greater stress, and diminished long-term value and resilience.

Who this applies to: Veterinary practice owners, managers, and financial directors.

What is a financial blind spot?  

Financial blind spots are operational areas where practice owners: 

• Lack visibility into the true financial health of the business 
• Make decisions without the full financial picture 
• Focus on activity rather than profitability 

These gaps affect more than the bottom line—they can impact profitability, cash flow, business value, and owner stress. 

Why does financial visibility matter to veterinary practices? 

Financial visibility is crucial to the success of a business. While busy teams, growing revenue, and strong client demand might give the appearance of success, many owners are still asking questions that indicate poor visibility: 

• “We’re busier than ever. Where is the money going?” 
• “Why does cash feel tight despite revenue being up?” 
• “I don’t fully understand my financials. What am I missing?” 

Financial visibility gaps and their impact on veterinary practices
 

1. Busy doesn’t always translate to profitability: Common signs for this problem are revenue growth with shrinking margins, longer staff hours with little financial improvement, and growth creating complexity rather than more profit. Activity does not equal profitability. 

2. Profitable on paper while stressed in reality: Profitability on paper can mask cash flow problems, causing stress for veterinary practice owners. This stress often leads to cautious or anxious behaviors that affect decision-making and growth.  

3. Limited financial visibility: Many businesses limit financial reviews to quarterly, tax season, or in response to a problem. Often, the books and records have not been prepared in a clean, consistent fashion that allows for proper analysis and comparisons. Without a regular review of accurate records, owners cannot spot trends early, adjust pricing or costs, and make informed decisions for growth. Monthly reviews are critical. 

4. Pricing that hasn’t kept pace: Don’t underestimate the impact of inflation, rising labor costs, technology expenses, and operational complexity. The result can be eroding margins and declining profits regardless of strong demand. 

5. Revenue leakage through missed charges and excessive discounting: Missed charges often occur during rushed checkouts, handoffs, or emergency cases in veterinary clinics. Leakage lowers staff value, contributes to burnout, and causes financial losses. Addressing leakage requires awareness and disciplined processes—not aggressive price increases. 

6. Revenue mix distortions: Non-core revenue streams can distort financial benchmarks if not separated from core medical income. Segmenting revenue properly reveals true performance trends and reduces confusion in benchmarking. Clarity in revenue mix is necessary for making good strategic decisions. 

7. Misaligned compensation structures: Compensation structures can unintentionally create challenges. For example, problems can occur if pay is not aligned with productivity, incentives reward activity instead of profitability, and ownership compensation is unclear—all of which make growth harder to sustain and adversely affect profitability.

8. Labor growth without clarity on productivity: Increasing staff without improving productivity can reduce overall profitability and operational efficiency. Normalized overtime and full schedules can mask inefficiencies and reveal financial gaps during growth. Careful financial review is essential to align staffing growth with sustainable and value-enhancing results. 

9. Inventory as a hidden cash trap: Overstocking and expiration can lead to drained cash and increased cost of goods sold in veterinary practices. Simultaneous complaints of stockouts and excess supplies highlight poor inventory management systems. When inventory is mismanaged, it ties up working capital, impacting cash flow and profitability. Maintaining awareness of inventory dynamics helps to identify when operational controls require improvement.

10. Don’t ignore the balance sheet: Many practice owners focus on income statements, neglecting balance sheets, which are crucial to financial health. Liquidity, leverage, and equity growth are vital indicators of business resilience and exit readiness. Ignoring the balance sheet limits strategic options and weakens negotiating power during business transitions.

11. Owner draws and hidden value erosion: When an owner treats the business like a personal ATM, it reduces business equity and limits strategic options. If personal lifestyle growth surpasses business earnings, long-term business value declines. Identifying value erosion early helps to preserve business options during expansion and sale. 

12. Lack of long-term financial planning: Many businesses plan for next month or next quarter instead of intentionally building the business over time. It’s important to step back to consider a long-term growth strategy, owner succession, business valuation, and exit planning. 

Key takeaways

• Make financial visibility a priority. 
• Pay attention to profitability, not just revenue. 
• Be strategic with pricing. 
• Ensure compensation structures are aligned. 
• Focus on long-term planning. 

BerryDunn can help 

Do you need help understanding the financial story behind your practice? The veterinary world is uniquely complex. As a veterinary accounting and financial management consulting firm, our proactive approach to client service, ability to anticipate potential problems and tax burdens, use of cutting-edge technology, and focus on industry trends clearly demonstrates our commitment to providing the best quality services for our clients, without geographic limitation. Helping a practice grow and succeed is one of our fundamental strengths. Learn more about our team and services. 

As BerryDunn’s Healthcare Practice Group lead, Lisa Trundy-Whitten is closely attuned to the healthcare industry. From challenges faced by healthcare organizations to the solutions BerryDunn’s experts can provide, Lisa shares thoughtful insights for healthcare leaders.   

We recently hosted the NAVIGATE Healthcare Leadership Summit, our annual virtual event featuring BerryDunn industry experts and four hours of educational sessions on critical issues facing healthcare today. Our team offered strategic insights on:

• Navigating the industry's most pressing challenges 
• Exploring OBBBA and the Rural Healthcare Transformation Program 
• Responding to payer audits and protecting revenue 
• Strengthening AI oversight after implementation

Navigating the now 

We kicked off the summit with a discussion on the state of the industry. From hospitals to senior living and home health and hospice to health centers, we recognize the challenges you face—shrinking margins, rising labor costs, workforce shortages, Medicare and Medicaid reimbursement, increased payer complexity, capital demands (e.g., aging facilities, technology investments), and more. The session offered several best practices, including:

• Staying ahead of CMS Fraud, Waste, and Abuse (FWA) compliance 
• Identifying regulatory risks, planning, and preparing to adapt 
• Focusing on audit readiness 
• Reviewing policies and procedures to align with requirements, revising as needed 
• Prioritizing payer strategy and price transparency and negotiation 
• Verifying the latest requirements online to avoid denied or delayed claims

OBBBA and the Rural Health Transformation Program Insights 

The H.R. 1 One Big Beautiful Bill Act (OBBBA) and Rural Health Transformation Program (RHTP) are important developments for finance and revenue cycle leaders to watch. Key takeaways from this session are:

OBBBA: 

• Automate eligibility checking. 
• Monitor payer mix and model impacts of Medicaid changes. 
• Review policies and procedures, update, and train staff. 
• Strengthen your revenue cycle and compliance programs. 

RHTP: 

• Monitor state rural health website for opportunities. 
• Join CMS and state list services. 
• Find the best opportunity for your organization to participate. 
• Determine populations to serve and services.  
• Identify areas to grow, develop, or partner with another organization. 

Payer audit strategies 

Payer audits continue to evolve across Medicare, Medicaid, and commercial plans, requiring providers to understand audit types, risks, and emerging trends to respond effectively. Our experts recommend the following actions: 

• Assess audit type and intent to guide response strategy. 
• Find out who initiated the audit, what’s being requested, deadlines, and submission requirements. 
• Don’t submit incomplete or excessive documentation because it increases risk rather than strengthening position. 
• Get better outcomes with strong documentation and an organized approach. 
• Evaluate results, address repayment or appeals, and implement corrective actions to reduce future risk. 

AI in the enterprise 

AI adoption in healthcare is quickly moving from experimentation to widespread operational use, but many organizations still lack the governance, controls, and oversight needed to manage associated risks. Here’s some post-implementation guidance: 

• Policy integration and oversight are critical.  
• Key risks include data exposure, bias, cybersecurity threats, over-reliance, and IP violations.  
• Control practices like data classification, human involvement, and traceability are essential. 
• Governance requires defined leadership, policies, and cross-functional involvement.  
• Monitoring, auditing, and reassessment are vital. 

Key takeaways

• Address financial and operational pressure by evaluating margin pressure, labor costs, workforce shortages, reimbursement challenges, payer complexity, and capital needs. 
• Prepare for regulatory and reimbursement changes by monitoring developments tied to OBBBA, Medicaid impacts, and RHTP funding opportunities. 
• Strengthen payer audit response by clarifying audit type, request scope, deadlines, documentation requirements, and follow-up actions. 
• Build stronger compliance and revenue cycle processes by updating policies, training staff, and improving audit readiness. 
• Establish AI governance after implementation by defining oversight, managing risk, and using controls such as data classification, human review, and ongoing monitoring. 

BerryDunn can help 

We’re here to support you. Reach out with questions or for guidance on how to strengthen your operations. I encourage you to learn more about our team and comprehensive services across healthcare.   

Best, 

Lisa Trundy-Whitten