Business valuations are no simple task, there are lot of areas to cover and many aspects to consider. While some business owners try to take on this project themselves, we don’t recommend it. You may miss some important things that could end up costing you big.

However, we do believe and encourage all of our clients to be involved and educated about all financial services. Today we are going to review some important things every business owner should know about business valuations.

Not sure you even need one? Take a look at one of our previous posts on why you could benefit from annual business valuations.


Understanding Business Valuations

Let’s get one thing clear: a business valuation is not just plugging numbers. Sure, it can be, but if you do this, you’re selling yourself short.

Rather, a proper valuation will combine professional expertise and analysis of various aspects that lead to a reasonable resolution of a business’s true value.

Typically, business owners are aware that cost, market, and income are all common aspects of value and that there are various approaches to assessing these three aspects, such as: Adjusted book value, excess earnings, guideline public company, merger and acquisition, capitalization of earnings, and discounted cash flow methods.

Now, we want to focus on some of the lesser known internal factors that should be considered in a business valuation.

At Saddock, when we begin a valuation, we will assess relevant financial information, such as tax returns and financial statements from the last 3 to 5 years, as well as forecasts, projections, and business plans.

However, to provide you with a completely comprehensive valuation, we will also explore non-financial information, like:

  1. Competition
  2. Business risks
  3. Management team (officers, directors, and key employees)
  4. Products and services
  5. Geographic market
  6. Background and history of the company
  7. Strategy and future plans
  8. Regulatory environment

These eight items just begin to skim the surface of areas we explore. We do so to provide the best valuation possible.

If you want to make sure that your valuation is as valuable as possible, there are a few tasks that you can undertake prior to starting the process.


Prep Your Business for Valuation

To supplement the valuation, business owners typically need to compile documents and information that can be used in the report.

Here are some of the things that you can provide to give your valuation expert a crystal-clear idea of your business as well as the company’s financial position, obligations, and management.

  • Comprehensive history of the company. This helps the appraiser in assessing the liquidity, viability, and solvency of the company.
  • Detailed descriptions of what is for sale and what is NOT—are you only seeking to sell assets? Perhaps this is a stock sale?
  • Details of the company’s legal type and ownership structure, including owners and percentage of ownership.
  • Explanations of any audits or IRS scrutiny as well as results of the audits.
  • Information of any lawsuits from the last 5 to 10 years.
  • Resumes of all company owners, officers, and top management executives; UNLESS it is a public company.
  • Summary of product inventory amounts for each product from the last 3 years.
  • A customer list, if feasible.
  • Breakdown of employee benefit plans and costs.
  • A list of all intellectual property like patents, copyrights, trademarks/service marks – and all license agreements.


Does all this seem like a lot?

That’s because it is, but it’s absolutely necessary to complete the big picture for your valuation expert. Determining a business’s value is straightforward, but it’s not simple. That’s why you want to be sure you have the right team of experts on your side to guide you through the process.


Saddock Support Is Here!

The team at Saddock Advisory has been helping our clients, business leaders just like you, solve problems and customize solutions for nearly four decades. We are here to help you understand and effectively complete the business valuation process.

If you want to learn more about our services or explore other resources just take a look around our site! If you’re ready to get started crafting insights and strategies that go beyond numbers, get in touch with us today!

Connect with us by filling out our contact form here or sending a message to


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A Simple Guide to Understanding Business Valuations
Business valuations are much more than just plugging in numbers. Get a quick look at the process and how to make sure yours runs smoothly.
2 Responses
  1. Your blog is so full of great insights. Thank you so much for sharing blog on a simple guide for business valuation . I have found it extremely helpful.

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