Guide
What a Business Valuation Costs
Three quite different products get called a business valuation, and they cost nothing, a few thousand dollars, or well into five figures. Owners routinely buy the expensive one when they needed the free one, or try to use the free one for a purpose that requires the expensive one. The deciding question is not how accurate you want the number to be. It is who is going to read it.
The three products
A valuation calculator or free market estimate. Applies industry multiples to your earnings and returns a range in minutes. Costs nothing. Good enough to decide whether selling is worth exploring, to sanity check an offer, or to know whether you are three years or ten years from your number.
A broker's opinion of value. A broker reviews your actual financials, recasts earnings properly, compares against real transaction data and produces a written opinion, typically ten to twenty-five pages. Often provided free by brokers who want the listing, or a few hundred to a couple of thousand dollars standalone. This is what you price a sale from.
A certified appraisal. A credentialed appraiser (ASA, ABV, CVA or similar) produces a formal report to a recognised professional standard, defensible under examination. Commonly $5,000 to $15,000 for a small business, and higher with complexity, deposition or testimony.
When you genuinely need the certified one
Litigation of any kind, including divorce and shareholder disputes, where the report will be filed and cross-examined.
Anything the IRS will read: estate tax, gift tax, transfers to family members, and equity compensation valuations.
SBA loans, where the lender requires an independent appraisal above a threshold, though that is generally the buyer's obligation rather than yours.
ESOP transactions, which require an independent valuation by law.
Buy-sell agreement triggers where the agreement specifies an independent appraisal.
In each of these the report has an audience with an interest in disputing it, and only a credentialed report survives that.
When free is genuinely enough
Deciding whether to sell at all. You need the order of magnitude, not a defensible figure. If the range says $600,000 and you need $2M to retire, the precision was never the issue.
Planning a timeline. Knowing roughly where you are tells you how many years of preparation sit between you and your number.
Evaluating an unsolicited approach. A free valuation before you respond is the single highest-return fifteen minutes available to an owner who has just been approached by a competitor.
Setting expectations before family conversations, partner discussions or an initial meeting with a broker.
How to avoid paying for the wrong one
Ask who will read it. If the answer is only you, your spouse or your business partner, a free valuation is sufficient. If the answer includes a judge, the IRS, a lender or opposing counsel, you need a credentialed appraisal and nothing cheaper will substitute.
Be wary of paying a large fee for what is really a broker's opinion of value dressed up. Ask directly for the appraiser's credential and the professional standard the report is prepared under. If neither is named, it is an opinion of value, and opinions of value should not carry appraisal prices.
**Start free.** The free estimate costs you nothing and tells you whether a paid valuation is worth commissioning at all. Doing it the other way round is how owners spend $8,000 to learn something a calculator would have told them in two minutes.
Find out what your business is worth
Five inputs, a real market range in seconds. Free and confidential.