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The Key Person Discount in Light of the Integrated Theory of Business Valuation

May 27, 2021

What is a key person discount?  The definition in the ASA Business Valuation Standards Glossary is:

“An amount or percentage deducted from the value of an ownership interest to reflect the reduction in value resulting from the actual or potential loss of a key person in a business enterprise.”

In Chris Mercer’s recent article, he suggests that the key person discount, like many valuation questions and issues, can and should be examined in the context of expected cash flows, their growth, and the risks associated with achieving them.  This consistent focus on these three key elements of value lies at the heart of the Integrated Theory of Business Valuation.

To view his insightful article, click here.

Disclaimer: The views, opinions or examples included in linked article are those of the author and do not necessarily reflect an official policy or position of ASA or its members.