Business
Valuation
What is Valuation?
A business valuation is a structured analysis used to estimate the economic value of a company or ownership interest. It examines historical performance, current financial position, and expected future cash flows to arrive at a defensible estimate of value.
Valuations are not based on a single formula. They combine financial analysis, industry context, and professional judgment to determine what a business is reasonably worth under a defined set of assumptions.
Professional valuations also consider factors such as ownership rights and liquidity. For example, the value of a controlling ownership interest may differ from that of a minority interest, and privately held businesses often reflect adjustments related to the lack of a public market for their shares. Concepts such as control premiums, minority discounts, and lack of marketability are therefore an important part of the valuation analysis.
A brief historical note: modern business valuation has roots in an unexpected place — Prohibition in the United States during the 1920s. When alcohol was banned, breweries and distilleries suddenly lost the ability to sell their primary product. Courts and tax authorities needed a way to estimate the economic loss suffered by these businesses. Accountants and economists began developing systematic methods to determine business value and quantify lost income. Many of the analytical approaches developed during that period continue to influence valuation practice today.
When a Valuation is Needed
Business valuations are often required when financing, strategic, or transaction decisions depend on a credible and well-supported assessment of a company’s value.
Typical use cases include:
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SBA and commercial lending
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Business sales or ownership transitions
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ESOP valuations
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Partnership changes
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Estate and succession planning
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Investor discussions and capital raises
In many cases, lenders or investors require a valuation before approving financing or completing a transaction.
Valuation Methods
Professional valuations typically rely on three primary approaches. The appropriate method depends on the nature of the business, the purpose of the valuation, and available information.
Income Approach:
Values the business based on the present value of expected future cash flows, often using discounted cash flow analysis or capitalization of earnings.
MarketApproach:
Estimates value by comparing the business to similar companies that have been sold or publicly traded, using valuation multiples such as EBITDA or revenue.
Asset Approach:
Determines value based on the net value of the company’s assets after liabilities, adjusted where necessary to reflect economic value
The Valuation Process
Engagements follow three stages.
Review historical financial statements, operational drivers, and the purpose of the valuation.
My Approach
Every valuation begins with understanding how the business actually operates. Financial statements provide the starting point, but the drivers of value often lie in pricing dynamics, margins, customer concentration, working capital cycles, and capital investment requirements.
Because my background is in operations and financial planning inside large organizations, I focus on connecting operational decisions with financial outcomes. This helps ensure that the valuation reflects the underlying economics of the business rather than relying solely on financial ratios or market multiples.
Valuation analyses are conducted in accordance with recognized professional standards, including those established by the National Association of Certified Valuators and Analysts (NACVA) and, where applicable, USPAP appraisal standards. Assumptions, methodologies, and supporting analysis are carefully documented so the work can be reviewed and understood by lenders, investors, and advisors.
Why Clients Work With Me
Valuations are often used in situations where the analysis will be reviewed by lenders, investors, attorneys, or other advisors. In these cases, the credibility and documentation behind the valuation matter as much as the final number.
Clients work with me because the analysis is designed to be clear, defensible, and grounded in how the business actually operates.
Key aspects of my approach include:
• Professional credentials and standards compliance. I hold the Certified Valuation Analyst (CVA) designation, and my work follows recognized professional standards established by NACVA and, where applicable, USPAP.
• Detailed and well-documented analysis. Assumptions, methodologies, and supporting calculations are clearly documented so the valuation can withstand review by lenders, investors, and other stakeholders.
• Forward-looking financial analysis. Valuations consider expected future performance, not just historical results, helping decision-makers understand the economic value of the business.
• Operational perspective. With more than two decades of experience working inside operating companies, I focus on how pricing, margins, working capital, and capital investment actually drive financial performance.
• Clear communication of results. Valuation reports are structured so that lenders, investors, and advisors can easily understand the assumptions, analysis, and conclusions.
The result is a valuation that is not only technically sound, but also practical and useful for real-world financial decisions.
A valuation is ultimately an opinion of value. The strength of that opinion depends on the quality of the analysis and the clarity of the supporting documentation.
What Clients Receive
Clients receive a formal valuation report that documents:
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The purpose and scope of the valuation
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Financial analysis and normalization adjustments
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Valuation methodologies applied
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Supporting data and assumptions
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The final conclusion of value
The report provides a clear, well-documented, and defensible explanation of the valuation analysis and conclusions for lenders, investors, and other stakeholders.
Fees
The cost of a business valuation depends on the complexity of the engagement, the purpose of the analysis, and the availability of financial information.
For most small and mid-sized businesses, a typical valuation engagement is around $8,000, although fees may vary depending on the scope of work and the level of analysis required.
If you are considering a valuation, I would be happy to discuss your situation and determine whether a valuation is appropriate. After a brief conversation, I can provide a clear proposal outlining the scope of work, timeline, and fee.