If you’re a business owner, you may have asked yourself: What is my business worth?
Whether you’re thinking about selling your company, bringing on a partner, planning for retirement, securing financing, or simply understanding the value you’ve built over time, knowing your business’s value is one of the most important financial insights you can have.
A business valuation provides an objective estimate of a business’s value based on its financial performance, assets, market position, growth potential, and other key factors. Many owners wait until they’re ready to sell before seeking a valuation—often discovering too late that they missed opportunities to increase value or address issues that could affect a future transaction.
In this guide, we’ll explain what a business valuation is, why it matters, the different types of valuations available, and how a Business Opinion of Value (BOV) differs from other valuation methods.
A business valuation is the process of determining a company’s economic value. It combines financial analysis, market data, industry trends, and operational considerations to estimate what a willing buyer would be willing to pay for a business under current market conditions.
Valuations may consider factors such as:
The resulting value serves as a benchmark for strategic business decisions and transaction planning.
Many business owners track revenue, profits, and growth metrics, but have little understanding of their overall business value. Knowing your company’s worth can provide significant advantages in several important areas.
Most owners eventually plan to exit their business, whether through a sale, succession, merger, or transfer to family members.
A valuation helps answer critical questions:
Without a valuation, owners often rely on assumptions or anecdotal industry multiples that may not reflect their actual market value.
Understanding value drivers allows owners to make decisions that increase enterprise value over time. A valuation may help identify:
For example, a valuation may identify:
These insights can help owners focus on initiatives that create long-term value.
Valuations are commonly used when:
An objective valuation provides a framework for fair negotiations.
Banks, lenders, and investors often seek to understand a company’s value when evaluating financing requests, acquisitions, or investment opportunities.
A valuation can support:
Business owners often have a significant portion of their wealth tied to their company. Business valuations are essential when planning for:
Valuation professionals generally use one or more of three primary approaches, depending on the situation.
The income approach estimates value based on a business’s future earnings or cash flows.
Common methods include:
This approach is often used for profitable businesses with predictable financial performance.
The market approach compares a business to similar companies that have recently been sold.
Factors considered include:
This method helps determine what buyers are currently paying for comparable businesses.
The asset approach focuses on the value of a company’s assets minus liabilities.
It is commonly used for:
A Business Opinion of Value (BOV) is an estimate of a business’s value in the current marketplace, typically prepared by an experienced business intermediary, mergers and acquisitions advisor, or business broker.
A BOV is often used by owners considering a future sale who want to understand market value without the expense or complexity of a formal valuation engagement. It typically incorporates:
A BOV typically incorporates:
The purpose is to provide a practical estimate of likely market value rather than a highly technical valuation report.
One of the most common misconceptions among business owners is that all business valuations serve the same purpose. In reality, the type of valuation you need depends on how the information will be used and who will rely upon it.
A Business Opinion of Value (BOV) is a market-based estimate of what a business may be worth in the current marketplace. It is typically prepared by an experienced business broker or M&A advisor and is designed to help owners understand potential value before making strategic decisions.
Purpose:
Estimate the likely market value for planning, exit preparation, or a potential sale.
Prepared By:
Business brokers, M&A advisors, and transaction professionals.
Best For:
Deliverable:
Typically, a concise report that incorporates financial performance, industry benchmarks, comparable sales, buyer demand, and current market conditions.
A Certified Valuation Report is a comprehensive valuation prepared by a certified appraiser. Unlike a BOV, this report is intended for situations where the valuation may be presented to third parties and requires a higher level of documentation and support.
Purpose:
Provide a formal, defensible valuation for legal, financial, tax, lending, or transactional purposes.
Prepared By:
Certified valuation professionals and accredited business appraisers.
Best For:
Deliverable:
A detailed valuation report that documents methodologies, assumptions, financial analysis, and supporting data. Summary reports can be easily understood by non-financial professionals who need to quickly evaluate the company’s value while still providing the rigor required for third-party review.
For many business owners, a Business Opinion of Value is the ideal starting point. It provides practical insights into what a business may sell for in today’s market and helps identify opportunities to increase value before an eventual exit.
However, if the valuation will be used for legal proceedings, tax reporting, financing, ownership disputes, or other situations involving third-party reliance, a Certified Valuation Report is often the more appropriate choice.
The key difference is that a BOV focuses on likely market value and transaction readiness, while a Certified Valuation Report is designed to provide a formal, documented valuation that can withstand scrutiny from lenders, attorneys, accountants, courts, and regulatory agencies.
One of the most common misconceptions among business owners is that all valuations are the same. They are not.
Purpose:
Estimate the likely market value for planning or sale preparation.
Prepared By:
Business brokers, M&A advisors, intermediaries.
Best For:
Deliverable:
Typically, a concise report focused on market value and transaction considerations.
Purpose:
Defensible valuation for legal, tax, financial, or regulatory purposes.
Prepared By:
Credentialed valuation professionals such as Certified Valuation Analysts (CVAs), Accredited in Business Valuation (ABV) professionals, or Accredited Senior Appraisers (ASA).
Cost:
Generally, it ranges from several thousand dollars to tens of thousands of dollars, depending on complexity.
Best For:
Deliverable:
Comprehensive valuation report with detailed methodologies, assumptions, and supporting documentation.
The terms “Business Valuation” and “business appraisal” are often used interchangeably.
In practice, a business appraisal generally refers to a formal valuation engagement conducted in accordance with recognized professional standards and methodologies.
A BOV differs because it focuses on market realities and likely transaction outcomes rather than creating a valuation intended to withstand legal or regulatory scrutiny.
Think of it this way:
Both have value—but they serve different purposes.
Many advisors recommend obtaining a Business Opinion of Value several years before an anticipated exit.
This allows owners to:
Even owners who are not planning an immediate sale can benefit from understanding the factors driving business value.
Several factors can significantly influence valuation outcomes:
Understanding these drivers allows owners to proactively improve their company’s value before entering the market.
Many business owners benefit from updating their valuation every one to three years, especially if significant growth, acquisitions, or ownership changes occur.
A BOV provides a market-based estimate using available financial information and transaction data. While it is not a formal appraisal, it can provide highly useful guidance for planning and decision-making.
Most advisors will request:
Yes. One of the greatest benefits of a BOV is the ability to identify opportunities to improve value before a business goes to market.
Your business is likely one of your most valuable assets. Yet many owners spend years building a company without ever understanding its true market value.
Whether you’re planning to sell in the near future, preparing for retirement, seeking financing, or simply evaluating your progress, a business valuation provides critical insight into the health and value of your company.
For many business owners, a Business Opinion of Value (BOV) is an excellent starting point. It delivers practical, market-based guidance, highlights value drivers, and helps owners make informed decisions about growth and exit planning.
Knowing what your business is worth today can help you maximize its value tomorrow.
Ready to understand the value of your business?
A professional Business Opinion of Value can help you identify opportunities, understand current market conditions, and create a roadmap for maximizing value before a future sale.