Valuation professionals use various methods to determine the fair market value of a private business or business interest. One of the more debated techniques is the excess earnings method. Here are answers to some common questions about this controversial method. What’s the excess earnings method? The U.S. Department of the Treasury originally developed the excess earnings method in 1920 to estimate value lost by businesses during Prohibition. This method separates a business’s earnings into two categories: Earnings attributable to tangible assets, and . Excess earnings, which represent returns on intangible assets. . Although not initially designed as a business valuation tool, the excess earnings method is easy for business owners, attorneys and judges without extensive financial expertise to understand. So it’s sometimes used to value professional practices and small businesses. How...