10 Use Cases
Business Valuation Use Cases
A business valuation serves a different purpose depending on the context, and the requirements, standards, and methodologies change accordingly. A valuation for selling your business focuses on fair market value and comparable transactions. A valuation for divorce must address personal versus enterprise goodwill. An SBA loan valuation must comply with federal lending regulations. Understanding what your specific situation demands is the first step toward getting the right valuation at the right level of detail.
Select your use case below to learn about the specific requirements, report types, and how to get started with a free estimate.
Why the Purpose of the Valuation Matters
Not all business valuations are created equal. The standard of value (Fair Market Value, Fair Value, or Investment Value), the level of detail (calculation vs. comprehensive report), and the required credentials of the analyst all depend on why the valuation is being performed. Using a valuation report designed for one purpose in a context that requires another can result in rejected loan applications, court challenges, IRS penalties, or negotiation breakdowns.
Each use case below explains the specific valuation requirements, the type of report needed, and how our free valuation calculator and professional reports support business owners at each stage of the process. For industry-specific valuation multiples, see our industry directory.
Selling a Business
A business valuation for selling purposes establishes the fair market value that a willing buyer would pay a willing seller, with neither party under compulsion.
Buying a Business
A business valuation for acquisition purposes helps buyers determine whether the asking price represents fair market value relative to the company's earnings, assets, and risk profile.
Divorce Settlement
A business valuation for divorce determines the fair market value of a closely held business as part of the equitable distribution of marital assets.
Partnership Buyout
A business valuation for a partnership buyout establishes the fair value of a departing partner's ownership interest so the remaining partners can purchase it at an equitable price.
SBA Loan Application
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Estate Planning
A business valuation for estate planning determines the fair market value of a business interest for gift tax, estate tax, and wealth transfer purposes as defined by IRS Revenue Ruling 59-60.
Retirement and Exit Planning
A business valuation for retirement and exit planning quantifies the owner's largest single asset so they can build a realistic financial plan for life after the business.
Investor Fundraising
A business valuation for investor fundraising establishes the pre-money valuation that determines how much equity an investor receives in exchange for their capital.
Business Insurance
A business valuation for insurance purposes determines the replacement value or business interruption exposure needed to set adequate coverage limits.
Tax Reporting and Compliance
A business valuation for tax reporting establishes the fair market value of a business interest for federal and state tax compliance, including gift tax returns (IRS Form 709), estate tax returns (IRS Form 706), charitable contribution deductions, and S-corp to C-corp conversions.
Frequently Asked Questions
When do you need a business valuation?
Common situations that require a business valuation include selling or buying a business, divorce proceedings involving business assets, SBA loan applications, estate and gift tax reporting, partner buyouts or disputes, bringing in new investors, employee stock ownership plans (ESOPs), insurance claims, and strategic planning. The required level of detail and credentials of the analyst depend on the specific purpose.
Is a business valuation required for divorce?
In most divorce cases involving a business, yes. Courts require a formal business valuation to determine the marital interest of each spouse and to divide assets equitably. The valuation must typically distinguish between personal goodwill (tied to the owner, often non-marital) and enterprise goodwill (transferable and marital property). A credentialed valuation analyst (ABV, CVA, or ASA) is usually required for the report to be accepted as evidence.
Do I need a business valuation to get an SBA loan?
For SBA 7(a) loans used to acquire a business, the lender typically requires a business valuation or appraisal when the loan amount exceeds $250,000. The valuation must demonstrate that the purchase price is reasonable relative to the business's earnings and assets. Some lenders accept a calculation-level engagement, while others require a more comprehensive report depending on the transaction size and complexity.
What is the difference between a calculation and a full valuation report?
A calculation engagement applies agreed-upon methods and assumptions to produce an approximate value, typically costing $2,000 to $5,000. A full (comprehensive) valuation report involves independent research, multiple valuation methods, detailed analysis of risk factors, and a formal opinion of value, typically costing $15,000 to $50,000. Calculations are suitable for internal planning and informal negotiations. Full reports are required for IRS filings, litigation, and regulatory compliance.
Can I use a free valuation calculator for legal purposes?
No. Free online valuation calculators produce estimates for planning and educational purposes, but they are not accepted by courts, the IRS, or lenders as formal valuations. Legal proceedings, tax filings, and SBA loans require reports prepared by accredited professionals (ABV, CVA, or ASA) who can defend their methodology and conclusions. A free calculator estimate is useful as a starting point before engaging a professional.
Not Sure Where to Start?
Our free calculator applies industry-specific multiples to your actual financials and produces a valuation range in under five minutes. Whether you are selling, buying, planning your estate, or applying for an SBA loan, the estimate gives you the baseline you need to make informed decisions.
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