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18 n e w h a v e n B I Z | D e c e m b e r 2 0 2 2 | n e w h a v e n b i z . c o m while others may be more focused on diversity, equity and inclusion. For example, one investor might feel strongly about investing in a company that is actively recruiting more women. Another might wish to avoid investing in a business that makes weapons or ammunition. "e environment comes up more," Beirne said. "How we think about it is — how are we aligning ourselves with companies that we believe are doing good for the world, beyond just doing well financially? A big part of that is having a diverse work culture and an idea around inclusion." e firm works with clients to learn exactly what they value and think is important in investing, and then aligns their portfolios accordingly. Tips for investors If you are interested in socially conscious or values-based investing, experts advise you to "do your research." "If you have a particular social cause that you care about, don't just look at the overall rating that an investment fund is espousing," Sacco advises. "Try to focus on something that's as specific as possible in terms of what you care about. en make sure that investment fund or product is addressing that issue for you." Eventually, the market will find a way to better measure these factors for investors, which will help people as they make their choices, he noted. Hersey, meanwhile, also advises investors to do their own due diligence, to understand exactly what they are investing in. "My primary tip would be to look un- derneath the hood and understand what companies are part of the fund or port- folio that you're investing in," Hersey said. "ere are a lot of funds that are labeled 'socially responsible,' but when you look at the underlying holdings, some of the companies may not be." By analyzing companies holistically, including with an environmental, social and governance lens, one is better able to identify areas of risk too, according to F o c u s - W e a l t h M a n a g e m e n t prior transactions in the subject company's stock, (2) the guideline public company method, and (3) the transaction (merger and acquisition) method. All three methods involve analyzing comparable companies whose equity has sold and the multiples they sold for. e sales price is divided by a measure of the company's earnings to understand the multiple they traded for as a guideline to determining what multiple might be appropriate for the company being valued. For example, if a company is sold for $100 million and it has $200 million in revenue, its revenue multiple is 0.5x ($100M/$200M). A valuation expert would look at the traits of that company to determine whether the same 0.5x revenue multiple should be used in valuing the subject business, based on its attributes. Arriving at a conclusion of value To arrive at a conclusion, a valuation expert considers the applicability of each of the approaches to value and the availability of data. In any analysis, the value of a business will consider multiple factors, including its financial performance; the risk of achieving projected results; factors specific to the company such as employees, operations and equipment; and the state of the economy and/or industry. n Marissa Pepe Turrell is a director in Marcum LLP's valuation, forensics and litigation services group and heads the firm's estate and gi tax valuation practice. E x p e r t ' s C o r n e r By Marissa Pepe Turrell A ccording to recent data, more than half of business owners are over 55. As these owners think about the next phase of life, many wonder what the lifetime of effort they put into building their business may be worth. Planning around transitioning ownership, whether by sale or by transferring (or giing) to the next generation, requires an understanding of the value of the business. Any business owner likely understands that their business makes up a large portion, if not the majority, of their personal net worth. But figuring out the value of a private business may seem mysterious and even overwhelming. e toolkit to valuing a business consists of three approaches: asset, income and market. ese approaches can be used in isolation or combination. Circumstances specific to the business, location, employees, industry and economy will dictate which approaches are best in each circumstance. Asset approach e asset approach, sometimes called a cost approach, is based on the principle of substitution, where an investor would not pay more for an asset than it would cost them to build or purchase a similar asset. is approach derives the business's value by estimating the value of each of its underlying assets (both tangible and intangible) and liabilities. is approach is most appropriate for valuing real estate; investment holding companies; capital-intensive companies, such as construction companies with large quantities of equipment; or even very early-stage companies that have yet to produce earnings. Income approach e income approach is primarily employed for valuing operating companies that already are, or are expected to become, profitable. is approach generally considers future earnings and the risk of achieving those earnings. e income approach can be performed in two ways: the discounted cash flow (DCF) method and the capitalized cash flow (cap cash flow) method. e DCF considers projected cash flows, oen a few years' worth, and then discounts the cash flows to present value. Experts use a discount rate (oen called a rate of return) that reflects the risks of achieving the projections. e cap cash flow method is a simplified version of the DCF that considers only one period of cash flow. is period is divided by a rate of return that is adjusted for growth. is method is typically used when long- term stable cash flows are expected. Market approach e market approach determines value based on similar investments in the marketplace. ere are three common methods used under the market approach: (1) Valuing a private business: ree approaches Marissa Pepe Turrell Hersey. Safety issues or labor challenges can oen wind their way into financial state- ments in the future, she noted. According to Beirne, any investor in- terested in value or socially responsible investing needs to assess their goals and risk tolerance. "I always encourage people to go and speak to a few different firms, so they can get a good sense of what is out there, what makes sense to them, and the types of investments they can invest in across different asset levels," Beirne said. n Continued on page 17 Beirne Wealth Consulting Services' Founder John Beirne (left) and President John-Oliver Beirne say investing based on one's values has broad appeal for everyone, regardless of gender.

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