There are a dozen reasons to know what your business is worth. You probably have one.
A valuation isn't something you do because an advisor told you to. It answers a specific question you're already asking — about a sale, a partner, your estate, or just whether the years have added up to what you think. Tell me which one is yours.
Selling the business
Then the figure you want isn't the one in your head — it's what a buyer will actually pay. For most owner-operated companies that's the asset sale value: the business delivered free of debt, you keeping the cash and receivables.
Timing is the whole game. Get a read 12 to 18 months early and you have time to fix what quietly discounts the price — customer concentration, owner dependence, thin records. Wait until a buyer is at the table and you negotiate from wherever the business happens to be that quarter.
I've mapped the full process in the owner's roadmap to selling.
Buying a business
You want to pay what it's worth, not what the seller hopes. An independent valuation before you sign a letter of intent gives you a basis to test the asking price — and to challenge the add-backs a seller uses to inflate earnings.
The earnings figure a multiple gets applied to is a negotiated number. Knowing how to read it is the difference between a fair deal and an expensive one.
A partner buying in or out
Partner transitions get expensive when there's no agreed way to value the stake. The figure here is equity value — what an ownership interest is actually worth once you account for the company's cash and its debts.
The best time to settle the method is before anyone wants out, in a buy-sell agreement. The second-best time is now. If a partner is already heading for the door, here's what that process looks like.
Passing it to family or your team
A handoff still has a value — for fairness among heirs, for a defensible price to the next owner, and for the gift- and estate-tax planning that usually rides alongside it.
Families assume a transfer inside the family doesn't need a number. It does. The absence of one is what turns a succession into a dispute.
Estate and gift planning
For planning — deciding what to move and when — an indication of value orients you and costs you almost nothing.
For an actual gift- or estate-tax filing, the IRS expects a qualified appraisal, which is a different and more formal document. The mistake owners make is paying for the formal one before they need it, or filing with an estimate that won't hold. Here's how to tell which you need.
Insurance and protection
If you carry key-person or buy-sell insurance, the coverage should track the real value of the business. Most owners set a figure once and never revisit it — which means they're either over-paying for coverage they don't need or under-protected against the loss they're insuring.
A current valuation tells you which.
Raising capital
Investors and lenders price the whole enterprise — equity and debt together. A current, defensible valuation sets the terms of that conversation before someone else sets them for you.
Walking into a raise without your own number means negotiating off theirs.
Just curious
Fair enough. It's the largest asset most owners have and the one they check on least — curiosity is a perfectly good reason.
Start with the free estimate. No one calls you, nothing is owed. If the number surprises you, in either direction, that's usually the moment a real conversation is worth having.
The common thread
Every one of those situations turns on the same fact: your business is almost certainly the largest asset you own, and the one you check on least. You know your home's value within a few thousand dollars. Most owners couldn't put a defensible number on the company that funds their entire life.
That's the gap worth closing. Not because a number is magic, but because every decision above — when to sell, what to accept, how to plan — gets made better when you're working from a real figure instead of a hopeful one.
Common questions
It tells you what the business is worth on a defensible basis, which is where the conversation starts. The final price is set at the table, by a buyer who has seen the financials. The valuation is what keeps that negotiation honest.
If a transition is years out, once a year is plenty — enough to watch the trend and catch problems early. If you're inside two years of a sale, you want it current and you want a plan to move it.
No. The first read is complimentary. No one calls you, nothing is owed, and what you do with the number is your decision.
Whatever the reason, the first step is the same: a clear, honest read on what the company is worth.
The words you'll hear
If this goes further, these are the terms that will come up, from us or from the other side. Each one links to a fuller explanation.
- Buy-Sell Agreement
- A contract among owners of a closely-held business establishing terms for transfer of ownership interests upon specified triggering events, death, disability, retirement, termination of employment, divorce....
- Letter of Intent
- A preliminary written document outlining the proposed terms of a transaction, purchase price, structure, key conditions, exclusivity, timeline, before parties negotiate definitive agreements.
- Due Diligence
- The buyer's investigation of a target business before committing to a transaction, examining financials, operations, contracts, IP, regulatory compliance, litigation, employment, tax, and other material risk....
- Earnout
- A deferred component of M&A purchase price, payable to the seller after closing only if the target business achieves specified financial or operational milestones during a....
- Asset Purchase
- A transaction structure in which the buyer acquires specified assets (and typically assumes specified liabilities) of a target business, rather than acquiring the target's equity.
- Representations and Warranties
- Statements of fact made by one party (typically the seller) to another (typically the buyer) in a transaction agreement, covering the condition of the target business.