Business Valuation

Guide to Valuing a Business

You can boost your valuation if you know what counts
By Daniel Kehrer

Placing an accurate value on a small business is a tricky affair. But it's also an exercise that may be necessary for a variety of reasons. Valuations (or appraisals) are a must, of course, for anyone buying or selling a business.

But they are also vital for partnership deals such as yours, as well as buy/sell agreements, family business succession planning, personal and estate planning and situations where you need bank or other financing. Other reasons you might need a valuation include divorce, spin-offs, liquidation and business disputes.

Top things to know or do:

1. You can determine the value of a business in many different ways, from quick and cheap software-based calculations you do yourself, to full-scope, certified valuations by professionals.
2. The price range is enormous, from as little as $15 for the simplest software, to thousands for a detailed analysis performed by certified pros. Business brokers, hoping to sell your business, may even do them for free.
3. Try to match the person or method you use for a valuation with the reason you are doing it. If the valuation is for loan purposes, for example, look for someone who's done small business valuations for that purpose.

Action Steps

The best contacts and resources to help you get it done

Locate a valuation expert quickly and easily online Certified valuation analysts can help.

I recommend:  The National Association of Certified Valuation Analysts (NACVA) offers a free service online to help you find a business valuation expert in your area. NACVA provides training, certification and support for professional valuators nationwide.

Look to national sources for business valuation needs No matter the need -- business acquisition, divorce settlement, partnership dispute, or IRS audit -- the right valuation firm can provide a smooth, professionally handled business valuation that holds up under legal scrutiny.

I recommend:  Nationwide Valuations offers a variety of valuation levels for small business, depending on your needs. Arrow Business Appraisers specializes in valuations for small, privately-held businesses of all types, nationwide, from auto repair shops, construction firms and delicatessens, to movers, vet clinics and Web hosts. Halas & Associates offers a computer modeled small business valuation system based on hard numbers. The Halas method does not include subjective items such as reputation or market presence.

Try a do-it-yourself valuation solution Value Any Business offers Do-It-Yourself Business Valuation Manuals designed for specific business types, such as flower shops, restaurants, spas, daycare centers, clothing stores, bakeries, beauty salons and others. The manuals help give you the expertise you'll need when explaining a business' value to a buyer, seller, banker, investor or client.

I recommend:  Discover details of the Value Any Business manuals.

Get it done with valuation software Dedicated valuation software can help you put an approximate value on your business.

I recommend:  PriceYourBusiness.com offers simple small business valuation software you can access online.Results are quick and available anytime. Other valuation software packages include: BizPricer; Express Business Valuation and Corporate Valuation.

Tips & Tactics

Helpful advice for making the most of this Guide

• One of the best reasons for tracking the value of your business, however, is simply this:So you know.
• Most entrepreneurs are capable of boosting the value of their businesses by 40 percent simply by paying attention to the things that make a business valuable.
• Too often, business owners brush aside valuations, believing them necessary only if they decide to sell. As a result, only about one in 20 small businesses have done a formal valuation, according to the National Association of Certified Valuation Analysts.