Thousands of businesses across the country are changing due to technological innovation and regulatory changes, to name a few. During these seasons of transition, business owners, advisors, and lenders often choose to rely on a business valuation to guide decisions. A valuation provides evidence-backed insight into a company’s fair market value, strengths, weaknesses, opportunities, and risk profile. To obtain a business appraisal, these professionals must follow a few steps. In this article, we discuss how to get a business valuation. Learning these steps can simplify the process for both you and the business appraiser.
Peak Business Valuation is a trusted business appraiser. With nearly a decade of experience, we have valued hundreds of businesses throughout the United States. To learn more about how to get a business valuation, schedule a free consultation with Peak today!
How to Get a Business Valuation
1. Determine the Purpose of the Valuation
The first step of receiving a business valuation is to determine the appraisal’s purpose. For example, a business valuation may help support selling a business or obtaining financing. The appraisal’s purpose directly impacts the analysis, so going into a consultation with a clear purpose clarifies the process.
Some common reasons for seeking a business valuation include:
- Selling a business
- Buying a business
- SBA financing
- Estate planning
- Gifting
- Litigation purposes
- Partner buyouts
2. Find a Qualified Business Appraiser
The next step in learning how to get a business valuation is to find a qualified business appraiser. This is perhaps the most important step when seeking an appraisal. Finding the right business appraiser ensures the valuation is credible, objective, and aligned with your goals.
Unlike online calculators, which rely on generic formulas and limited data, a professional appraiser provides a customized assessment tailored to your business. They consider industry nuances, intangible assets, and future potential, delivering results you can trust. Moreover, valuation experts are able to weigh each valuation methodology to best represent your business and calculate its value.
When choosing an appraiser, prioritize proper accreditation. At Peak Business Valuation, our valuation experts hold certifications like Accredited Senior Appraiser (ASA) and Accredited in Business Valuation (ABV). Industry experience is equally important, ensuring the appraiser understands the specifics of your field. To find an accredited business appraiser, see our guide Finding a Business Appraiser.
How Business Appraisers Determine Value
Business appraisers use three primary techniques to determine a company’s value: the market approach, the income approach, and the asset approach. Each methodology serves a different purpose and works best for specific types of businesses.
- Market Approach: This approach compares your business to similar companies that have recently sold. It uses valuation multiples like SDE or revenue multiples to estimate value. The market approach is ideal for businesses in active industries with plenty of sales data available.
- Income Approach: The income approach focuses on your business’s ability to generate future profits. Appraisers project cash flows or earnings and discount them to present value. This technique is best for businesses with stable, predictable income streams.
- Asset Approach: This approach calculates value by totaling all assets and subtracting liabilities. It is useful for asset-heavy businesses or those with inconsistent earnings.
Most valuations use a combination of these approaches to ensure precision. A business appraiser determines which approaches are most appropriate based on your business’s unique circumstances.
3. Gather Financial & Operational Documents
Third, gathering financial and operational documents before consulting a professional is key. Organizing this data from the trailing 3 to 5 years ensures business appraisers have what they need to begin the valuation.
Below are common documents that business appraisers request before valuing a business:
- Tax returns
- Profit & Loss statements
- Balance sheets
- Payroll
- Client contracts and partnership agreements
- Customer concentration
- Asset lists
4. Schedule a Consultation
Once you have found a business appraiser, the next step is to schedule a consultation. With Peak Business Valuation, a free consultation can answer any questions you may have. We clarify the valuation’s purpose, discuss what the valuation will consist of, as well as its expected cost and timeline. Now is also a good time to ask the appraiser if there are additional documents needed.
When you are ready to get started on your business valuation, schedule a free consultation with Peak! We are here to answer your questions and provide you with a credible appraisal of your business. Schedule your consultation with Peak today by clicking on the button below!
Using the Valuation Report
After valuing your business, the analyst delivers a business valuation report. This document outlines the methods, data, and findings used to support the conclusion of value. It includes the business’s fair market value and identified risks and value drivers. These insights can support numerous events and decisions. For instance, many business owners and investors use their valuation report to guide exit planning, negotiations, setting an asking price, financing, and other strategic planning. With a credible report, you can gain confidence as you navigate your next steps.
Conclusion
Still wondering how to get a business valuation? Follow these simple steps: first, determine the purpose of your valuation. Second, find a qualified business appraiser. Third, gather financial and operational data from the past 3-5 years of your business. Last, schedule a consultation with your chosen appraiser. Following this guide will help you prepare effectively for your valuation and find the right appraiser to ensure credible results. No matter your business goals — selling, buying, financing, litigation — a business valuation can provide you with the insight you need to navigate these decisions.
As a professional business appraiser, Peak Business Valuation has extensive experience valuing businesses nationwide. We are happy to provide you with a business appraisal that serves your business goals. Begin today by scheduling a free consultation with Peak!
