THE LEVELS OF VALUE IN BUSINESS VALUATION. THE DISCOUNT FOR LACK OF MARKETABILITY

This paper approaches the subject of levels of value used in business valuation and adjustments (discounts and prime) that enable professional business valuers to relate these in order to determine the value of a business or ownerships interests in a business. Marketability and control over business decision have a profound impact on the value of an ownership interest. Valuators, regularly, reduce the value of an investment interest if it lacks a ready market. In this paper, I highlight the difference between the marketability and liquidity and, the differences between the the discount for lack of marketability and discount for lack of control. A discount for lack of marketability is closely associated with, but, conceptually, distinct from, the discount for lack of control. I present the characteristics of discount for lack of marketability and the rational of applying it in valuation of minority and majority interest.