Valuation analysts highly discourage the use of fixed formulas in buy-sell agreements. The primary reason, as stated in the question's premise, is that a formula established at one point in time is very unlikely to reflect the company's fair market value when a triggering event occurs, which could be years or even decades later. This discrepancy can lead to a price that is grossly unfair to either the buyer or the seller, often resulting in costly litigation. Instead, analysts recommend establishing a process for determining value at the time of the triggering event, such as an appraisal by a qualified, independent business appraiser.

A. Encouraging a method known to produce inequitable and outdated values would be contrary to the professional standards of a valuation analyst.

C. While analysts are generally flexible, they specifically advise against this particular rigid approach due to its inherent and significant flaws.

D. Analysts advocate for flexibility in valuation methodology; they do not restrict it, but they guide clients away from demonstrably poor methods.

1. National Association of Certified Valuators and Analysts (NACVA). Business Valuations: Fundamentals, Techniques & Theory (FT&T) Course Materials. In the sections covering Buy-Sell Agreements, the curriculum consistently warns against the use of fixed-price or formula-based approaches due to their failure to reflect fair market value over time. It emphasizes that such agreements are a primary source of valuation-related litigation. The recommended best practice is to specify a process for valuation at the triggering date. (Refer to the module on Buy-Sell Agreements).

2. Pratt, S. P. (2009). Business Valuation and Taxes: Procedure, Law, and Perspective. John Wiley & Sons. In Chapter 11, "Valuations for Buy-Sell Agreements," Pratt explicitly discusses the pitfalls of formulaic approaches, stating, "It is almost a certainty that any fixed price or formula price in a buy-sell agreement will not be representative of the fair market value of the stock at the triggering date..." (p. 235).

3. Hitchner, J. R. (2017). Financial Valuation: Applications and Models. John Wiley & Sons. Chapter 32, "Valuation Issues in Buy-Sell Agreements," details the problems with formula approaches, noting they often fail to consider changes in the company, its industry, or the economy, leading to disputes. The text advocates for using a qualified appraiser to determine value contemporaneously with the triggering event.