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The end of 4Q 2024 marks the start of a new year. In the Valuation Group, the end of the calendar year brings us to one of our busiest times of year: “ESOP season.” During the first few months of the year, we perform annual valuations for 30+ ESOP clients.

Meanwhile, other members of the valuation team have been focusing on assisting business owners with exit planning through our value acceleration service. The value acceleration exit planning framework is designed to help business owners identify and address value constraints and transferability limitations, but like turning a ship, it takes time. We recommend that business owners understand their strengths, limitations, and value at least five years before planning to exit. This proactive approach allows for a smoother transition and maximizes the business’ value.

Often, business owners like to wait until year-end results come out to make decisions. That way, they can compare performance year-over-year to aid in decision-making. Now that 2024 has concluded, we can assist business owners with decision-making by determining the value of the business based on year-end results. The end of the year is a busy time, with fiscal years wrapping up and holidays in full swing. As we move into 2025, it's an opportune moment to make strategic decisions for the future.

Speaking of busy, M&A activity often peaks in the fourth quarter. In 2024, this trend was again observable. After a strong year in 2024, our transaction advisory team is looking to help more clients sell or buy companies in 2025.

Another exciting opportunity for BerryDunn’s valuations team is the merger of BerryDunn and Burzenski & Company on December 1, 2024. Burzenski is well known for its work with veterinary practices and the construction industry. The merger will enable BerryDunn to expand into the veterinary practice market and add to its existing construction practice.

We track trends in several databases of private company transactions, among them GF Data, Capital IQ, DealStats, and BIZCOMPS. As presented below, we saw a slight downturn in multiples in the third quarter of 2024. We also saw the number of transactions increase in the fourth quarter compared to the third quarter of 2024 and in line with the first and second quarter.

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.  

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

There are a few indexes we keep an eye on. The S&P 500 is generally considered the go-to benchmark for stock market performance, although it is dominated by a handful of large tech stocks. 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.

Stock prices have followed a generally upward trend throughout 2024 but have started to trend downward toward the end of Q4.

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. As summarized below, key drivers of the US economy generally remained near similar levels in 4Q as in 3Q.¹

¹ Source: Federal Reserve Economic Data, available at https://fred.stlouisfed.org/.

² Indicates the likely effect on business value for most businesses. Depending on the business model, certain businesses may demonstrate an inverse relationship to economic variables compared to the market as a whole.

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 Northeast³. If your business is headquartered outside of New England, reach out to us for an economic analysis specific to your market area. 

Economic activity  

Economic activity increased slightly overall. Prices and employment levels were roughly unchanged, and wages rose at a modest pace. Air travel was a relative bright spot, as domestic air passenger traffic through Boston finally surpassed 2019 levels, and passenger traffic through the Worcester airport increased substantially in the past year. Tourism activity overall increased only modestly, however, and restaurants in some areas reported softer-than-expected sales. Retail revenues rose slightly, and consumers remained highly price-conscious. Manufacturing sales were mixed, while software and IT services firms experienced stable and healthy demand. Residential real estate sales increased modestly, helped by improved inventories in some areas, while commercial real estate activity was flat. The outlook was modestly optimistic on balance, although some contacts had concerns for 2025 related to how national economic policies might change and where long-term interest rates would land.

Labor markets  

Employment was roughly steady, and wages increased modestly on average. Contacts in the retail, tourism, and software and IT services sectors all reported stable headcounts. Among manufacturing contacts, headcounts increased slightly at selected firms, decreased modestly at one in response to slower sales, and were reportedly unchanged otherwise. Labor supply to retail and tourism jobs improved modestly, with contacts noting greater ease of hiring and reduced attrition. Wages increased modestly on average, and contacts reported no elevated wage pressures. However, one manufacturing contact experienced a significant increase in health insurance costs that they partly passed on to employees, while offering a slight wage increase as an incomplete offset. No contacts mentioned plans for major changes in hiring or wages in 2025. Cape Cod contacts, whose businesses rely heavily on seasonal worker visas, expressed concerns that potential changes to visa programs could restrict their labor supply in 2025 or beyond.

Prices 

Prices were about flat on balance. An online retailer reported only modest pricing pressures and remained keenly aware of consumers’ heightened price sensitivity. The same contact was cautiously optimistic that any tariffs would not have a major impact on their prices, owing to changes made to their supply chain in recent years. Hotel room rates in the Greater Boston area decreased modestly on a year-over-year basis, but contacts pointed out that the change was in relation to the record-high room prices of November 2023. Manufacturers held output prices steady, even though most experienced slight to modest increases in input prices. Software and IT services firms posted modest price increases on average. Contacts did not foresee major changes in pricing pressures for their businesses moving forward.

Retail and tourism 

First District⁴ retail contacts reported slight increases in revenues in recent months, while tourism activity experienced modest growth on average. An online retailer described fourth-quarter revenues as stable overall but said that promotions had been critical to those results and that demand for lower-end goods remained weak. On Cape Cod in the fourth quarter, hotel occupancy rates and retail sales met expectations and were roughly on par with the fourth quarter of 2023, but restaurants experienced weaker-than-expected sales. Airline passenger traffic through Boston increased moderately in the fourth quarter from one year earlier, with domestic travel finally surpassing 2019 levels. Worcester air passenger counts grew 18 percent from the previous year. Like the change in hotel room prices, hotel occupancy rates in greater Boston were down slightly in November from one year earlier, when occupancy rates had been at all-time highs. Contacts expected robust tourism and convention activity for Boston for 2025. The outlook for retail and restaurant activity was more cautious, as contacts in those businesses expected roughly flat activity going forward.

Manufacturing and related services 

Manufacturing sales were flat on average since the last report. Most firms reported no change in revenues in the fourth quarter from the third, but sales were unexpectedly soft for one manufacturer and unexpectedly strong for another. The strong sales pertained to a frozen fish producer who speculated that retailers were accumulating inventories in anticipation of tariffs. A semiconductor maker with flat sales said that demand for their products was softening and that they would adjust employment downward moving forward. Capital expenditures largely stayed within forecast ranges. The outlook for 2025 was modestly positive on balance, as most firms expected sales to increase at least slightly in the new year, but one semiconductor manufacturer expected moderate declines in sales relative to 2024.

IT and software services 

First District IT and software services contacts described demand as stable at healthy levels, and one firm’s total revenues for 2024 exceeded expectations. Capital spending was constant, and physical investments were described as minimal given firms’ reliance on cloud computing services. Contacts expected revenues to increase strongly in the first quarter of 2025, based on a combination of organic growth in demand and, in one case, the recent acquisition of another company. Considering the longer-term outlook, most contacts expressed confidence that demand for their products would continue to rise, even in an environment of heightened political and macroeconomic uncertainty. Nonetheless, one firm said that increased competition from China affecting its clients could either boost its business, as client firms invested in new technologies to keep up, or hurt demand if clients were pushed out of the market altogether by such competition.

Commercial real estate 

Commercial real estate activity was mostly flat in the First District. Contacts reported uniformly that elevated long-term interest rates continued to limit transactions. One contact said that borrowers, hoping that long-term rates would decline, continued to favor extensions for maturing loans. However, several contacts downgraded the chances of significant rate declines in 2025. Office leasing activity remained slow, but prime Boston properties continued to experience relatively healthy activity. Contacts described industrial and retail leasing activity as stable. Rents and occupancy rates were unchanged across all asset classes. One contact said that a recent Massachusetts law intended to promote multifamily construction was yielding tangible results in some areas of the state. Around half of contacts were cautiously optimistic that the first quarter of 2025 would bring more robust commercial real estate activity, while others expected current activity levels to persist or, more pessimistically, that interest rates would stay higher for longer than previously expected and exert negative impacts on the market.

Residential real estate 

Home sales in the First District rose modestly on a year-over-year basis in November 2024, the most recent month for which data was available. Supporting the increase in sales, home inventories were up moderately from a year ago overall, with very large increases in Maine and Vermont, although inventories declined moderately in Massachusetts from a year earlier. However, the typical number of days homes spent on the market increased, as multiple contacts mentioned that some buyers were waiting until after the presidential election to make purchasing decisions. Considering changes since November 2023, prices of single-family homes increased at a brisk pace, while condo prices increased moderately on average in Massachusetts and Rhode Island but decreased modestly in the northern New England states. Multiple contacts expressed optimism that more sellers would put their homes on the market in early 2025 and that this would lead to increased sales activity.

³ Quoted from the Beige Book – January 2025 from the Board of Governors of the Federal Reserve System.

⁴ The Federal Reserve System’s First District includes Connecticut (excluding Fairfield County), Massachusetts, Maine, New Hampshire, Rhode Island, and Vermont.

• To learn more about ESOPs, here is a brief overview of ESOPs we put together. 
• Interested in learning more about business valuations? Read more here or pick up a copy of our book, A Field Guide to Business Valuation.
• MaineBiz recently featured an article about exit planning for business owners.

Where to find us

Casey Karlsen and Seth Webber are leading a four-part workshop series for business owners about increasing business value and liquidity. We previously summarized this content in a couple of blog posts (Session 1, Session 2, Session 3). Take a look if you missed us! 

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

For manufacturers in New England, the global trade environment has always played a significant role in shaping supply chain strategies and cost structures. With the current tariff landscape marked by rapid changes and adjustments due to ongoing trade negotiations and economic strategies, businesses must be ready to quickly reevaluate their pricing models and material cost standards to maintain profitability. 

Tariffs and the rising cost of materials for manufacturers 

Tariffs on imported raw materials—especially steel, aluminum, and electronic components—have significantly impacted manufacturing costs for many New England manufacturers. Impacts include:  

• Higher material costs: Price increases in metals and components force businesses to either absorb higher costs or pass them along to customers, potentially affecting competitiveness. 
• Supply chain disruptions: Many businesses that previously relied on international suppliers must reconsider domestic sourcing, which may not be as cost-effective. 
• Increased production costs: With raw materials costing more, the overall cost of goods sold increases, tightening profit margins. 

What manufacturers can do now to be ready for tariffs 

For CFOs, controllers, cost accountants, and business owners, it is imperative to assess how these tariffs affect cost margins and whether existing standard costs remain valid. Key considerations include: 

• Reassessing bill of materials pricing: Companies should review and update material costs in their enterprise resource planning (ERP) systems to reflect current market prices. 
• Revising standard costs: Many manufacturers set cost standards based on historical pricing. With tariffs inflating costs, businesses should update these figures to avoid inaccurate pricing models and profitability projections. 
• Scenario planning for future tariffs: The tariff landscape remains uncertain. Running cost simulations under different tariff conditions can help businesses prepare for potential future changes. 
• Vendor and supply chain analysis: Evaluating domestic versus international sourcing and considering supplier renegotiations could mitigate tariff impacts. 

How BerryDunn can help 

Navigating the complexities of tariff-induced cost increases requires a strategic approach. At BerryDunn, we assist manufacturers with: 

• Costing analysis and standard updates: We help businesses reassess standard costs and implement updated costing models to maintain accuracy in financial reporting. 
• Profit margin impact assessments: Our team can analyze the direct and indirect effects of tariffs on your bottom line, identifying opportunities for cost recovery. 
• Supply chain cost modeling: We provide financial modeling to compare sourcing alternatives and develop cost-efficient strategies. 
• Budgeting and forecasting support: Our expertise in financial planning ensures your business remains resilient despite tariff fluctuations. 

The tariff landscape continues to evolve, and manufacturers must remain proactive. By reassessing costs and adapting pricing strategies, businesses can sustain profitability and competitive positioning. If you need assistance understanding how tariffs impact your financials, BerryDunn is here to help. Reach out to our team today to help your business stay ahead of the curve. 

From the complexities of the regulatory environment, to staffing shortages and skill deficits, to the rising costs of technology, healthcare organizations today face greater challenges than ever before. Among the key trends threatening a provider's financial stability is the surging rate of claim denials, resulting in delayed payments, increased operational costs, and potential revenue loss. For many providers, the financial strain of managing these denials has become unsustainable.

So, what can your organization do to thrive in the face of today’s revenue cycle reality? Consider shifting from managing denials after they occur to preventing them before they happen. By proactively tackling denials at the source, your organization can both lower collection costs and also enhance your financial stability through improved cash flow.

Why focus on denials prevention?

Denied claims can mean denied revenue. Denials happen along the entire revenue cycle, preventing your organization from being paid for services in a timely way––or at all. Your options have been to rework the claim or write it off, and both will cost you:

• Rework is expensive. On average, rework costs $25 per claim and adds at least 14 days to pay. Success rates vary between 55% and 98%.
• Write-offs are a net loss. The industry only appeals 35% of denied claims, absorbing write-off losses that range from 1% to 5% of net patient revenue.

A better alternative is to prevent denials from occurring in the first place. Below are five strategies to help your organization avoid claim denials and collect what’s due.

Proactive denials prevention: A glide path

Creating a system for preventing denials requires an assessment of where you are today, a committee of stakeholders, the setting of sustaining goals, and continued monitoring. 

1. Baseline analysis: Where are you today?

You can’t prevent denials without understanding their root cause. Begin with a holistic baseline assessment of the underlying causes by payer and denial categories. This analysis will help identify and correct potential issues related to clinical denials, underpayments, billing and administrative processes, and coding and compliance issues.

The Healthcare Financial Management Association’s MAP Keys provide a foundation for monitoring and reporting denials. These industry-standard metrics or KPIs are a way to track your organization’s revenue cycle performance using objective, consistent calculations.

Key metrics include your organization’s:

• Initial denial rate – zero pay
• Initial denial rate – partial pay
• Denials overturned by appeal
• Denial write-offs as a percent of new revenue

Note: Appeals are the most expensive and longest way to get paid. But you lose 100% of the denials you don’t fight!

Track trends and details by:

• Payor
• Department
• Reason
• Codes (CDM/CPT)
• Dollars and Volume
• Control charts

2. Accountability: Establish a Denials Prevention Committee

Before you begin shifting from denials management to denials prevention, set your organization up for success by creating a Denials Prevention Committee and securing the solid support of senior leadership. Your team should include stakeholders across the organization, including:

• Revenue integrity
• Managed care
• Care coordination
• Billing
• Coding
• Patient access
• IT
• Department leaders
• Special guests, such as payor representatives and clinical leaders

3. Set your goals: What is possible?

The Denials Prevention Committee is accountable for identifying the patterns and trends that are leading to denials and recommending preventative measures. With insight from your baseline analysis, the committee will identify the top denial issues, their root causes, and potential actionable measures to avoid future denials. Prevention measures could include:

• Educating and training staff on common denial causes and best practices for accurate coding and claim submission to prevent errors
• Identifying opportunities to build in system automation to prevent denials
• Creating a better understanding of the specific billing rules and requirements of each payor to tailor claims accordingly

4. Results: Active denials prevention and monitoring

The committee is charged with implementing denial avoidance measures, monitoring, and reporting on the results. The process includes regular reporting on initial denial, appeal, and win rates to determine over time if the measures are working, and if the results are sustainable.

Tracking and trend analysis can help identify:

• New opportunities for denial prevention
• Areas that should be prioritized
• Emerging issues that should be addressed
• Payor behavior trends

5. Follow-up process: Who should work denials?

Even the most effective prevention measures won’t eliminate all claim denials. Working claims is part of the AR follow-up process––but it’s important to allocate the right resources at the right time. Consider creating a decision matrix to help determine who works your denials, with criteria based on both denial complexity and dollar value. For example, assign your:

• Dedicated AR follow-up staff to work straightforward, low-dollar denials and claim corrections related to eligibility, COB, credentialing, referrals, and authorizations
• Denials specialist to focus on high-dollar claims that may require specific payor forms, cover letters, rebilling, etc.
• Clinical Appeals RN to work high-dollar complex and clinical denials requiring a formal appeal letter with evidence from the medical record to support the claim

Setting up a dollar threshold can help guide resource allocation. For example:

• AR follow-up staff: $200 - $4,999
• Denials specialist: $5,000 - $34,999
• Clinical Appeals RN: $35,000+

Once your denial efforts have been exhausted, consider outsourcing write-offs to a third-party agency for one final attempt. Weigh the potential for more revenue against the balance remaining on the books for a longer period.

Ultimately, shifting to denials prevention and effectively allocating your follow-up resources will help reduce your administrative costs, improve your cash flow, and enhance patient satisfaction. Don’t let due dollars go unpaid!

With experts along the entire continuum of care, BerryDunn's approach to revenue cycle optimization focuses on cash acceleration, revenue integrity, and helping to ensure that every dollar owed is collected. Based on best practices, we help bolster performance and improve the efficiency and effectiveness of your revenue cycle. Learn more about our team and services. 

In a closely held business, ownership always means far more than business value. Valuing your business will put a dollar figure on your business (and with any luck, it might even be accurate!). However, ownership of a business is about much more than the “number.” To many of our clients, ownership is about identity, personal fulfillment, developing a legacy, funding their lifestyle, and much more. What does business ownership mean to you? In our final article in this series, we are going to look at questions around what ownership means to different people, explore how to increase business value and liquidity, and discuss the decision of whether to grow your business or exit—and which liquidity options are available for each path. 

While it may seem counterintuitive, we find that it is best to delay the decision to grow or exit until the very end of the value acceleration process. After identifying and implementing business improvement and de-risking projects in the Discover stage and the Prepare stage (see below), people may find themselves more open to the idea of keeping their business and using that business to build liquidity while they explore other options. 

Once people have completed the Discover and Prepare stages and are ready to decide whether to exit or grow their business, we frame the conversation around personal and business readiness. Many personal readiness factors relate to what ownership means to each client. In this process, clients ask themselves the following questions:

• Am I ready to not be in charge?
• Am I ready to not be identified as the business?
• Do I have a plan for what comes next?
• Do I have the resources to fund what’s next? 
• Have I communicated my plan?

On the business end, readiness topics include the following:

• Is the team in place to carry on without me?
• Do all employees know their role?
• Does the team know the strategic plan?
• Have we minimized risk? 
• Have I communicated my plan?

Whether you choose to grow your business or exit it, you have various liquidity options to choose from. Liquidity options if you keep your business include 401(k) profit sharing, distributions, bonuses, and dividend recapitalization. Alternatively, liquidity options if you choose to exit your business include selling to strategic buyers, ESOPs, private equity firms, management, or family. 

When it comes to liquidity, there are several other topics clients are curious about. One of these topics is the use of earn-outs in the sale of a business. In an earn-out, a portion of the price of the business is suspended, contingent on business performance. The “short and sweet” on this topic is that we typically find them to be most effective over a two- to three-year time period. When selecting a metric to base the earn-out on (such as revenue, profit, or customer retention), consider what is in your control. Will the new owner change the capital structure or cost structure in a way that reduces income? Further, if the planned liquidity event involves merging your company into another company, specify how costs will be allocated for earn-out purposes. 

Rollover equity (receiving equity in the acquiring company as part of the deal structure) and the use of warrants/synthetic equity (incentives tied to increases in stock price) is another area in which we receive many questions from clients. Some key considerations:

• Make sure you know how you will turn your rollover equity into cash.
• Understand potential dilution of your rollover equity if the acquiring company continues to acquire other targets. 
• Make sure the percentage of equity relative to total deal consideration is reasonable.
• Seller financing typically has lower interest rates and favorable terms, so warrants are often attached to compensate the seller. 
• Warrants are subject to capital gains tax while synthetic equity is typically ordinary income. As a result, warrants often have lower tax consequences.
• Synthetic equity may work well for long-term incentive plans and for management buyouts. 

We have found that through the value acceleration process, clients are able to increase business value and liquidity, giving them control over how they spend their time and resources.

If you are interested in learning more about value acceleration, please contact the business valuation services team. We would be happy to meet with you, answer any questions you may have, and provide you with information on upcoming value acceleration presentations. 

The 2025 Home Health Value-Based Purchasing (HHVBP) payment adjustments have been finalized. Designed to reward those organizations that demonstrated better outcomes in patient satisfaction, quality of care, and hospitalizations/emergency department use, the result was a payment adjustment. This varied from -5% to 5% for participating home health agencies based on their 2023 performance data.

2025 payment adjustments

While each home health agency Centers for Medicare & Medicaid Services Certification Number (CCN) was given their payment adjustment for 2025, many agencies were left to ask: how did everyone else fare?

Within the large cohort*, 3,465 (53%) of agencies received an increase in payment and 3,018 (47%) received a decrease in payment. For the small cohort*, 327 agencies received an increase and 348 received a decrease. Nearly half (4809 or 40%) of home health agency CCNs were omitted from the HHVBP calculations due to Medicare size/insufficient data or recent Medicare certification date (new agency).

Total Performance Scores (TPS)

For the large cohort, agencies that were smaller in size (less than $3M) saw larger Total Performance Scores (TPS) overall than medium and larger agencies (over $3M in revenue). Of those agencies that received an increase in payment, 55% had less than $3M in annual Medicare revenue. Small agencies also outperformed medium and larger-sized agencies with OASIS and Claims Based measures. However, medium and larger agencies outperformed smaller agencies on the CAHPS-based outcomes.



As we unravel the 4,809 agency CCNs being exempt from this model, we must also question true market saturation rates and access to care for seniors, as these are based on CCN counts and not active patient counts.

We're here to guide you

BerryDunn has solutions to support all agency HHVBP needs, including our CAHPS Improvement Bundle, hospitalization analysis, outsourced OASIS solutions, and OASIS training and education. We also offer clients access to our HHVBP reporting using the national database to help clients better understand their performance compared to agencies across the country. For more information on our HHVBP services or becoming a client, contact Lindsay Doak.

*Cohorts: Determined prospectively, based on each HHA's unique beneficiary count in the prior calendar year (CY) as defined below: Smaller-volume cohort: the group of competing HHAs that had fewer than sixty (60) unique beneficiaries in the calendar year prior to the performance year; Larger-volume cohort: the group of competing HHAs that had sixty (60) or more unique beneficiaries in the calendar year prior to the performance year.

As the new year begins, your organization may be starting to plan for your next fundraising event. In addition to raising money for the organization, fundraising events are a wonderful way to build relationships within the community, raise awareness for a cause, and provide a meaningful experience to donors. Beyond the excitement and benefits of these events, there are important Form 990 reporting and compliance requirements that you must consider. Below are the most frequently asked questions we receive from our clients. We hope this helps you avoid some common pitfalls around fundraising events.

Contributions vs. fundraising revenue

For Form 990 reporting, it is important to distinguish between contributions and fundraising revenue generated by the event.

Fundraising event contributions typically consist of the following items:

• Donations: These include pledges or direct donations made by attendees during the event.
• Sponsorships: Corporate or individual sponsorships for the event.
• Ticket sales or admission fees: The payment to attend the event is considered a contribution if no goods or services are provided in return.

Fundraising revenue from an event typically consists of the following items:

• Ticket sales or admission fees: As noted above, if no goods or services are provided to attendees at the event, the entire cost of the ticket or admission fee is considered contribution revenue. However, if goods and services are provided to attendees, the Fair Market Value (FMV) of these goods and services is considered fundraising event revenue. The portion of the ticket price that exceeds the FMV of the goods and services provided (meals, entertainment, etc.) is considered a contribution (see example below under “Quid Pro Quo Contributions” section). This would also apply to sponsorships where the sponsor receives goods and services in conjunction with their payment.
• Merchandise sales: If any products are sold at the event, income from these sales would be reported as fundraising event revenue.
• Auction items: Similar to merchandise sales, the FMV of an auction item sold would be considered fundraising revenue. Any sale proceeds in excess of the FMV would be considered contribution revenue. The organization should maintain a list of the FMV of the auction items.

Please note that if the fundraising event includes a raffle, any proceeds from the raffle need to be broken out and reported separately. Raffle income is specifically noted as gaming revenue and should be reported in the gaming section on Form 990 Part VIII and Schedule G, Part III. Read more details on gaming requirements for not-for-profit organizations.

The reason it is important to distinguish between contribution and fundraising revenue derived from an event is because they are reported separately on the Form 990. On Schedule G, Part II, and the Statement of Revenue (Part VIII) of the Form 990, contributions from a fundraising event are subtracted from the gross receipts of the event to arrive at gross income. All expenses associated with the fundraising event are then subtracted from gross income to calculate net income from the event.

If most of the revenue from the event(s) is made up of contributions, it may result in showing a “net loss” from the event(s) on Form 990 Part VIII and on Schedule G, Part II. This can be deceiving to the readers of the form because, in most cases, the fundraising event(s) will have generated net income if contribution revenue were to be included as part of gross income from the event(s). This is simply a quirk to the Form 990 reporting and should not be a concern to the organization if their fundraising event(s) is showing a “net loss” on the Form 990.

There is an upside to reporting fundraising event revenue this way. Fundraising event contributions will now be included as part of the organization’s total contributions on Form 990, Part VIII. This is beneficial to organizations who complete the Schedule A, Part II, or Part III Public Support Tests, as an increase to total contributions will increase the overall public support percentage of the organization.

Quid Pro Quo contributions

A quid pro quo contribution is a payment made to a charity by a donor partly as a contribution and partly for goods or services provided by the charity. Quid pro quo contributions are quite common for fundraising events, specifically larger events like an annual gala or golf tournament.

If the organization receives a quid pro quo contribution in excess of $75, the organization is required to notify the donor of the FMV of the goods and services they received for their contribution. This is typically done in the form of a written donor acknowledgment letter.

For example: An organization hosts a golf tournament and charges $150 per attendee to play. In exchange, the attendee gets a round of golf, use of a golf cart, and food/drinks during the event. The FMV of everything provided by the charity to the attendees totals $100. In this case, only $50 is tax deductible as a charitable contribution ($150 paid minus $100 FMV of goods and services received) and the $100 of value received must be relayed to the attendee. In this example, the organization would recognize $100 of fundraising revenue and $50 of contribution revenue per attendee on their Form 990.

When determining the value, the IRS allows you to use any reasonable method to estimate the FMV of goods and services provided to a donor, if the method is applied in good faith. The rule of thumb when determining FMV is to use the price that is charged to ordinary consumers on the open market. In our golf tournament example above, you could use the price that is offered to the general public for a round of golf (with use of cart), and the food/drinks provided when determining the FMV. For any goods or services not commercially available, you can estimate the FMV using similar or comparable goods or services. If necessary, you can consult with vendors or experts to accurately assess the FMV.

It is important to note that the value reported to the donor must be based on the FMV of goods and services received and not the costs incurred by the organization.

Just a few things for you to consider when planning your next fundraising event. Should you have any questions about your specific situation, please contact our not-for-profit tax team.

Amara's Law states, “We overestimate the impact of technology in the short term and underestimate its effect in the long run.” Ten years ago, I confidently told people I wasn’t worried about my daughter learning to drive because I thought self-driving cars would be common by then. Today, my daughter is driving, and it will likely be many years before fully autonomous vehicles are prevalent on the roads.

Looking back over my lifetime, the technological changes have been astounding—from the black-and-green computer screens of MS-DOS to immersive 4K virtual worlds, and from BASIC’s simple if/then programming to neural networks containing vast amounts of the world’s knowledge. Even more remarkable are the changes my 96-year-old grandmother has witnessed. Machine-sliced bread was invented in 1928, the year she was born, the same year as the first fully electronic television system, IBM®’s Type 4 Tabulator, and the first rocket-powered aircraft.

The predictions I share below are adapted from a session I presented on "Parks and Recreation in the Age of AI." While these predictions for the future of parks and recreation are grounded in current technological trends, I offer them with humility. I will overestimate some impacts and underestimate others. In 2035, I may look back and laugh at this article. Regardless, I remain confident in one thing: parks and recreation will remain vital—likely even more so—providing spaces for human connection, physical health, and mental well-being in a rapidly changing world.

Parks and Recreation in 2035: A practitioner's perspective

Rapid advancements in artificial intelligence (AI), robotics, quantum computing, and augmented reality will redefine how society functions by 2035. These changes will uniquely impact parks and recreation, challenging and empowering them to serve their communities in new ways. AI promises to improve efficiency and deliver data-driven insights while shifting relationships and climate challenges will require innovative solutions. Parks will continue to play a critical role as spaces for human connection, health, trust, and resilience in a technology-driven world.

1. AI and robotics will revolutionize park operations

Advances in AI and robotics will automate tasks like mowing fields, cleaning facilities, and monitoring safety. This will improve efficiency while allowing staff to shift focus to strategic planning and community engagement.

2. Technology will present new safety risks and tools

AI-powered tools, such as drones and robotic devices, introduce both safety risks and solutions for parks and events. While these technologies pose new threats to patron safety, they also enable faster and more effective emergency responses, especially in remote or hard-to-reach areas. Drones, cameras, and AI-enhanced monitoring systems will significantly improve safety measures but raise ongoing concerns about data privacy, surveillance, and ethical use.

3. Job roles will shift toward technology management

The rise of AI and robotics will disrupt traditional roles, requiring parks to retrain staff for technology-based positions like managing automated systems and AI tools.

4. Parks will blend technology and nature

Parks will integrate advanced technologies like AI, AR, and VR into programming to create immersive experiences, such as interactive trails, educational opportunities, and virtual fitness programs. These tools will also provide nature-based experiences for individuals with limited mobility or confined to hospitals and care facilities.

5. Parks will combat sedentary lifestyles and mental health challenges

Despite advancements in healthcare, technology will continue to contribute to loneliness, sedentary behavior, and screen addiction. Parks will remain critical for encouraging physical activity, building human connections, and promoting mental well-being. Programs and spaces will counter digital overload by emphasizing outdoor experiences and community engagement.

6. Parks will lead climate resilience efforts

Parks and public lands will be increasingly valued for their environmental benefits, including air quality and cooling solutions to combat extreme weather impacts. AI and sensors will assist with tracking ecosystems, threats such as wildfires, and responding to environmental changes.

7. AI will unlock data-driven decision-making

AI systems will analyze patron behavior, resource usage, and operational data, enabling parks to make smarter, real-time decisions about programming, maintenance, and engagement.

8. Parks and recreation provides positive public engagement with government

Public trust in all levels of government has declined over the last two decades. By fostering meaningful community engagement, shared experiences, and positive interactions with public employees, parks and recreation will play an important role in building relationships and rebuilding public confidence.

9. Parks will provide spaces for authentic human connection

In a digital age dominated by virtual interactions and AI companions, parks will remain essential as places for face-to-face interaction, teamwork, and shared experiences that build real human relationships.

10. Ethical AI adoption will require thoughtful implementation

As technology advances, parks must adopt AI tools transparently and ethically. Leaders will need to balance innovation with community expectations around privacy, fairness, and trust.

As technology evolves at an unprecedented pace, parks and recreation professionals will face both challenges and opportunities by 2035. AI, robotics, augmented reality, and even quantum computing may reshape park operations, programming, and safety measures. At the same time, parks will address the negative impacts of technology—promoting human connection, active lifestyles, and climate resilience. Parks and recreation will remain essential as spaces that balance technological innovation with the timeless values of community, health, and nature.

The role of artificial intelligence, augmented reality, and spatial computing in creating this article

This article began as a presentation I delivered at multiple conferences. Building on that foundation, I created a first draft in Grammarly to refine initial ideas. ChatGPT 4o analyzed the draft content for gaps and helped succinctly combine overlapping points. I then used ChatGPT 4o Canvas for collaborative editing, applying prompts like: “Base the paragraph entirely on the draft text below. Use the author’s words, tone, and style whenever possible, but make minor grammar and flow improvements.” During this process, I worked from a virtual monitor superimposed over my real-world surroundings with XR glasses.

Innovative strategies for parks, recreation, and libraries 

BerryDunn's consultants work with you to improve operations, drive innovation, identify improvements to services based on community need, and elevate your brand and image―all from the perspective of our team’s combined 100 years of hands-on experience. We provide practical park solutions, recreation expertise, and library consulting. Learn more about our team and services. 

What are the top three areas of improvement right now for your business? In this third article of our series, we will focus on how to increase business value by aligning values, decreasing risk, and improving what we call the “four C’s”: human capital, structural capital, social capital, and consumer capital.

To back up for a minute, value acceleration is the process of helping clients increase the value of their business and build liquidity into their lives. Previously, we looked at the Discover stage, in which business owners take inventory of their personal, financial, and business goals and assemble information into a prioritized action plan. Here, we are going to focus on the Prepare stage of the value acceleration process.

Aligning values may sound like an abstract concept, but it has a real world impact on business performance and profitability. For example, if a business has multiple owners with different future plans, the company can be pulled in two competing directions. Another example of poor alignment would be if a shareholder’s business plans (such as expanding the asset base to drive revenue) compete with personal plans (such as pulling money out of the business to fund retirement). Friction creates problems. The first step in the Prepare stage is therefore to reduce friction by aligning values.

Reducing risk

Personal risk creates business risk, and business risk creates personal risk. For example, if a business owner suddenly needs cash to fund unexpected medical bills, planned business expansion may be delayed to provide liquidity to the owner. If a key employee unexpectedly quits, the business owner may have to carve time away from their personal life to juggle new responsibilities. 

Business owners should therefore seek to reduce risk in their personal lives, (e.g., life insurance, use of wills, time management planning) and in their business, (e.g., employee contracts, customer contracts, supplier and customer diversification).

Intangible value and the four C's

Now more than ever, the value of a business is driven by intangible value rather than tangible asset value. One study found that intangible asset value made up 87% of S&P 500 market value in 2015 (up from 17% in 1975). Therefore, we look at how to increase business value by increasing intangible asset value and, specifically, the four C’s of intangible asset value: human capital, structural capital, social capital, and consumer capital. 

Here are two ways you can increase intangible asset value. First of all, do a cost-benefit analysis before implementing any strategies to boost intangible asset value. Second, to avoid employee burnout, break planned improvements into 90-day increments with specific targets.

At BerryDunn, we often diagram company performance on the underlying drivers of the 4 C’s (below). We use this tool to identify and assess the areas for greatest potential improvements:

By aligning values, decreasing risk, and improving the four C’s, business owners can achieve a spike in cash flow and business value, and obtain liquidity to fund their plans outside of their business.

If you are interested in learning more about value acceleration, please contact the business valuation services team. We would be happy to meet with you, answer any questions you may have, and provide you with information on upcoming value acceleration presentations.

This article is the second in a four-part series based on the book A Field Guide to Business Valuation, written by BerryDunn’s Seth Webber and Casey Karlsen. 

In Part I of this four-part valuation overview series, we talked about the “valuation rocket ship.” The valuation rocket ship is an illustration to conceptualize the components of a business valuation. The market approach, which we'll explore in this article, is one of three different ways to estimate the value of a company. In its simplest form, the market approach is fairly straightforward. Below is a very basic model for how a valuation could be applied:

This model is called the market approach because the EBITDA multiple is estimated based on a comparison to sales of similar companies.

Application of the market approach to valuation

If you have ever had a house appraised, you have a level of familiarity with the market approach. When real estate appraisers value a house, they look for similar houses (i.e., comparables, or “comps”) that have sold and calculate the price per square foot of these comparables. They then select a reasonable price per square foot from the range indicated by the comparables and multiply this figure by the square footage of the house being valued, indicating its value.

The market approach in business valuations follows the same basic procedures. However, price per square foot is not a meaningful indicator of business value. Extremely valuable businesses may have small facilities, and less valuable companies may have sprawling facilities. Therefore, instead of using a price per square foot, the valuation analyst uses more relevant denominators, such as annual revenue or EBITDA.

There are two primary market approach methods: the guideline completed transaction method and the guideline public company method. The guideline completed transaction method relies on the prices of recently sold similar companies, as illustrated in the example above. The guideline public company method uses the stock prices of similar publicly traded companies. By summing up the market value of all outstanding stock and debt, valuation analysts calculate the total value of publicly traded companies from the disparate ownership interests.

In both the guideline completed transaction method and the guideline public company method, the analyst performs the following steps:

1. Identify sales of similar companies or calculate the value of similar publicly traded companies.
2. Calculate relevant valuation multiples by dividing the value of each guideline company by a denominator such as revenue, operating income, EBITDA, or other value drivers.
3. Select an appropriate valuation multiple(s) from the range of indicated multiples and multiply it by the subject company's financial fundamentals, indicating business value.

There are many nuances to valuing a business using the market approach, but these steps summarize the basic market approach framework.

Strengths of the market approach

A foundational text for in the business valuation community is Revenue Ruling 59-60, which defines fair market value as “the price at which the property would change hands between a willing buyer and a willing seller…”¹ The market approach can provide a convincing indication of value because it is based on exactly that—an actual transaction involving people buying and selling similar businesses.

The market approach may also be more easily understood than other valuation approaches for readers who don’t have a background in finance. In the income approach, business value is estimated by discounting or capitalizing the benefit stream of a business. If the reader is not familiar with the estimation and application of income approach variables, they may find the market approach to be more understandable and therefore reliable. The income approach is also heavily reliant on projected future cash flows, an area of uncertainty and potential bias.

Even when the income approach is applied, the market approach can be used as an indicator of reasonability. Credibility is enhanced if a valuation analyst uses two or more different processes to get similar indications of value.

Weaknesses of the market approach

While one of the strengths of the market approach is how well it relates conceptually to the definition of fair market value, it also highlights a potential weakness of the market approach. Many transactions occur because the acquirers expect to achieve synergistic benefits from the transaction. These synergies may be priced into the transaction, potentially inflating the transaction price above fair market value. Therefore, it is possible for the market approach to indicate investment value rather than fair market value. It is also difficult to know what motivated a sale. Without knowing the intent of the buyers and sellers, it is difficult to determine whether a transaction reflects fair market value or investment value.

It is often difficult to locate companies that are reasonably similar to the subject company. People often start businesses because they see a need that isn’t being met—that is, there aren’t any companies like the one they want to start. The point of a business is to be different than its competitors. While differentiation is great for creating a competitive advantage, it makes it difficult to find similar companies. Even if a market supports multiple similar businesses, these companies may not have ever sold. As a result, valuation analysts often struggle to identify guideline companies.

Identifying guideline public companies has its own set of challenges. Publicly traded companies often diversify their operations to reduce risk. The lack of pure-play public companies may limit the number of guideline companies available to the analyst. Further, publicly traded companies are often significantly larger than privately held companies, posing additional comparability challenges.

Another common limitation when applying the market approach is the lack of data from completed transactions. Financial data is often incomplete as it may have never been disclosed by either party in the sale of a business. Much of the data necessary for the market approach is also from subscription-based databases. If analysts choose to forgo this cost, they may lack sufficient data to apply the market approach.

The consideration paid in completed transactions is another potential weakness in the market approach. Consideration may include stock of the acquiring party, earn-outs, non-compete agreements, and other items. Adjusting these to a cash equivalent can be a subjective exercise. And where there is subjectivity, there is room for error.

Another area of subjectivity and potential errors is in the selection of valuation multiples. When valuing a house, the price per square foot of the selected comparables is typically in a much narrower range than the range of multiples when valuing a business. Analyst judgement is required to select a valuation multiple from the reported range. Analysts may err by selecting a multiple that is not warranted by the subject company’s operational risk profile and/or historical and projected financial performance.

At a high level, the application of the market approach is a straightforward three-step process: (1) identify sales of similar companies, (2) calculate relevant valuation multiples, and (3) select and apply an appropriate valuation multiple.

The discussion above should provide high-level clarity as to the application of the market approach. Keep in mind the strengths and weaknesses of the market approach when formulating an opinion about the usefulness of this indication of value.

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. Learn more about our team and services. 

¹ Revenue Ruling 59-60, 1959-1 CB 237; Estate Tax Regulations §20.2031-1(b); Gift Tax Regulations §25.2512-1.