4 Ways to Prepare for a Business Valuation

Apr 18, 2018Business, Business Valuation

Ready to sell your business? Or planning to keep the business in the family by gifting ownership to a relative? Whatever the reason may be – estate planning, mergers and acquisitions, litigation support, equity or debt financing, or marital dissolution – it is vital to engage experienced professionals and prepare for a business valuation.

We work with business owners to help determine their company’s values relative to their situation or business plan. We take a comprehensive view of all you have invested in your business and what you have created. Below are four items we review during the process and what you can do to prepare your business.


Determining the purpose of the valuation will help the analyst identify the level of detail and length of the report needed.  

For example, the sole owner of a family-run company may be looking into the possibility of passing down the company to a child. In this case, the owner may simply want a number value, rather than all of the ins-and-outs of how the valuation analyst arrived at the value. If gift tax returns are necessary, a full valuation report will be required.

Another example would be a valuation needed for the purpose of litigation. This may result from a number of things and may require a significantly higher level of detail. The level of detail needed not only has to support and defend the arrived at value, but be appropriate for a court setting. Valuation analysts will need to know what portion of the company’s assets are going to be included in the valuation.

What you need to prepare prior to the valuation:

  • Determine the purpose of valuation (e.g. gifting, estate planning, marital dissolution, etc.).
  • What is and what is not being valued (e.g. ownership percentage, assets, etc.).


The most vital piece to an effective valuation is the financial information. Valuation analysts typically review company’s financial statements and tax returns from the prior three to five years. Depending on how often financial statements are created, a valuation analyst may use current quarter or even current month financials to annualize the remainder of the year. Financial projections for three to five years beyond the current year financial statements are typically requested from management. If a company expects changes to happen in the near future impacting revenues or operations, it may influence the outcome of a valuation significantly.What you need to prepare prior to the valuation:

  • Financial statements – previous three to five years
  • Financial projections – three to five years
  • Tax returns – previous three to five years


The valuation analyst will review the company’s profile and industry to determine what value there is in the company’s processes, if the ownership structure allows the company to continue operations smoothly after a sale, or even considering competitors, suppliers, and customers. Giving the valuation analyst an in-depth look at the company and its background may help to highlight value-add processes, understand management, and potential future earnings.

Areas of information you need to prepare prior to the valuation:

  • History
  • Industry
  • Ownership structure
  • Major Competitors
  • Major Suppliers 
  • Major Customers
  • Intellectual property
  • Litigation involvements – past 5 -10 years
  • Audit or IRS scrutiny 
  • Any liens against the company


The valuation analyst will review the company’s current CPA, consultants, and attorneys if applicable.  

Contact information you need to prepare prior to the valuation:

  • CPA
  • Consultants
  • Attorney

No two companies are the exact same, so what is necessary to prepare for a business valuation will vary. It may seem like a lot of information to put together, but it is important for a valuation analyst to have a complete understanding of the company. It is beneficial to the analyst, as well as the company, and will help the analyst to develop an effective report.

Contact Us

We work with business owners, in multiple industries, to uncover the true value of their companies’ tangible and intangible assets. The resulting valuation report provides an accurate baseline measurement that informs your strategic plan – whether your goal is to sell the business, arm yourself for litigation or build additional value for the future. 


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