How to Value a Service Business: Key Methods & Factors

Sep 25

Your business's value isn't a static number—it's a dynamic figure that you have the power to influence every single day. While knowing your current worth is important, understanding how to increase it is what truly empowers you as an owner. The first step is getting a clear baseline through a professional assessment. A comprehensive service business valuation doesn't just tell you where you stand today; it highlights the specific areas where you can build a stronger, more resilient, and more profitable company for the future. This guide provides a practical roadmap, showing you not only how to value your business but also how to take actionable steps to improve it.

Key Takeaways

Your Real Value Isn't on the Balance Sheet: In a service business, your most important assets are your brand reputation, customer loyalty, and documented systems. These intangibles are what truly drive predictable cash flow and create a company that's built to last.
Make Your Business Less Dependent on You: Increase your company's worth by creating systems that allow it to run smoothly without your constant involvement. Focus on diversifying your client base, building recurring revenue, and documenting your processes to create a scalable, transferable asset.
A Valuation Is a Roadmap, Not Just a Price Tag: Don't wait until you're ready to sell. A professional valuation provides an objective look at your business's health, highlighting specific areas for improvement and giving you a clear plan to increase its value over time.

Why Is Valuing a Service Business So Different?

Figuring out what a service business is worth isn't as straightforward as valuing a company that sells physical products. Why? Because so much of your value is tied up in things you can't see or touch, like your reputation, your client relationships, and the expertise of your team. Unlike a business with a warehouse full of inventory, your greatest assets walk out the door every evening. This makes the valuation process more of a nuanced art than a simple calculation, but getting it right is crucial for understanding your company's true health and potential.

The Unique DNA of a Service Business

At its core, any business's value comes from its ability to generate cash flow. But in a service business, that cash flow is created by people, processes, and relationships—not just physical assets. Your company’s worth isn't in its office furniture; it’s in your team's specialized knowledge, recurring client contracts, and stellar brand reputation. These intangible assets are the engine of your profitability. Understanding this is the first step to accurately assessing your company's value. It’s less about what you own and more about what you’ve built.

Common Myths About Business Valuation

It’s easy to fall for valuation myths, especially when you hear people throwing around industry multiples. A common one is that your business is worth a simple multiple of revenue or earnings. The truth is, no two service businesses are alike. You can't apply a generic formula because unique factors—like customer concentration or team strength—heavily influence your actual worth. Another pitfall is overvaluing "potential." While growth prospects are important, a credible valuation is grounded in proven performance and predictable cash flow, not just future hopes.

Why You Need Regular Valuations

Thinking of a business valuation as a one-time event is a mistake. Your company's value isn't static; it changes with the market, your performance, and your industry. A key client leaving or a new competitor emerging can shift your value significantly. That's why regular valuations are so important. Think of them as a check-up for your business's financial health. They provide a clear snapshot that helps you make smarter strategic decisions, track progress, and be prepared for unexpected opportunities.

Four Proven Ways to Value Your Service Business

Figuring out what your business is worth isn't about picking a number that feels right. It’s a structured process, and professionals use several proven methods to get a clear picture. Think of these as different lenses to view your company’s value—each one highlights something unique. While one method might be a better fit for your specific business model, understanding all four gives you a well-rounded perspective. This knowledge is powerful, whether you're planning to sell, seeking investment, or just want to know where you stand. Let's walk through the most common approaches used to value service-based businesses like yours.

Seller's Discretionary Earnings (SDE)

This method is a go-to for valuing smaller, owner-operated businesses. The Seller's Discretionary Earnings (SDE) calculation is designed to show a potential buyer the total financial benefit they would get from owning the company. To find your SDE, you start with your net profit and add back specific expenses. This includes your own salary, any personal perks you run through the business (like a car lease), one-time expenses that aren't likely to happen again, and items like interest and depreciation. It essentially creates a picture of the business's true cash-generating power for a single owner, making it a practical and widely accepted valuation method.

EBITDA Multiples

If your business is a bit larger or has a management team in place, you’ll likely hear the term EBITDA. This stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. The EBITDA method is great because it removes the effects of financing and accounting decisions, allowing for a more direct comparison between different companies. You calculate your company's EBITDA and then multiply it by a number based on industry averages and market conditions. This "multiple" can vary widely depending on your industry, growth rate, and overall business health. It’s a way of valuing your company based on its operational performance before any financial dressing is considered.

Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) method is a bit like looking into a crystal ball, but with a lot more math. Instead of focusing on past performance, this approach projects your business's future cash flow over several years. It then "discounts" that future cash back to its value in today's dollars, because money you'll have in five years is worth less than money you have right now. This method is particularly useful for businesses with inconsistent earnings or high growth potential, as it focuses on future promise rather than historical data. A solid DCF analysis relies heavily on strong, defensible financial forecasts.

The Market Comparison Method

This is probably the most straightforward method to understand because it works just like real estate. To find out what your house is worth, you look at what similar houses in your neighborhood have recently sold for. The market comparison method does the same for your business. It determines your company’s value by comparing it to similar service businesses that have been sold recently. Key factors include the industry, revenue size, profitability, and the terms of the sale. The biggest challenge here is finding good, reliable data on comparable sales, which is where working with an experienced valuation professional can make all the difference.

What Actually Drives Your Business's Value?

When you think about your business's value, it’s easy to get stuck on the numbers—revenue, profit, assets. But for a service business, the real story is much deeper. Your company's worth is a blend of tangible and intangible factors that, together, paint a picture of its current health and future potential. A potential buyer isn't just purchasing your balance sheet; they're investing in your reputation, your team, and your ability to consistently generate cash. Let's break down the core elements that truly define what your business is worth.

Your Financial Health and Key Metrics

Let's be real: your financial health is the foundation of your business's value. But it's not just about the equipment you own or the cash in the bank. At its core, "business value is based on a company's ability to generate cash flow." The assets are simply the tools that help create that flow. A potential buyer wants to see strong, consistent, and predictable cash flow. They’ll look at your key financial statements to understand your profitability, margins, and how efficiently you manage your money. Clean, well-organized financials are non-negotiable; they build trust and show that you run a professional operation.

The Strength of Your Customer Relationships

In a service business, your customers are everything. That's why the strength and stability of your client base are huge value drivers. Do you have long-term contracts in place? Is a large portion of your income from recurring revenue? High customer retention rates are a fantastic sign for a potential buyer because they signal a stable, healthy business with a predictable income stream. If you can show that your customers are loyal and happy, you're demonstrating that the business has a solid foundation that isn't likely to crumble overnight. A diverse client list is also a major plus, as it reduces the risk of losing a huge chunk of revenue if one big client leaves.

Your Market Position and Growth Potential

Your business doesn't operate in a vacuum. Its value is also tied to its position within your industry and its potential for future growth. Are you a recognized leader in your niche? Do you have a unique service offering that sets you apart from the competition? Valuation isn't just a snapshot of your current earnings; it's also a forecast of what the business could achieve in the future. A company with a clear, credible plan for expansion, a large addressable market, and a strong competitive advantage will always command a higher price. This is where you show a buyer that they aren't just buying a job; they're investing in an opportunity.

Your Team and Leadership

A service business is powered by its people. A skilled, stable, and motivated team is one of your most valuable assets, especially if the business can run smoothly without your daily involvement. Low employee turnover is a powerful indicator of a positive work culture and effective management, which are very attractive to a new owner. If you have a strong leadership team in place that can manage operations, client relationships, and strategy, you’ve significantly increased your company’s value. It proves the business is a well-oiled machine, not a one-person show that will fall apart once you exit.

The Power of Intangible Assets

Some of your most valuable assets are the ones you can't see or touch. These are your intangible assets, and they play a massive role in the valuation of a service business. Think about your brand's reputation in the community, your proprietary software, or your established customer lists. As one expert notes, "Intangible assets like a strong brand and good reputation are significant contributors to business value." These elements are what create a loyal following and give you a competitive edge. They are often the "secret sauce" that makes your business unique and difficult to replicate, making them incredibly valuable to an acquirer.

Your Documented Systems and Processes

Imagine handing the keys to your business to someone new. Would they know what to do on day one? Clear, documented systems and processes are crucial for ensuring a smooth transition and demonstrating that your business is scalable. When you have standard operating procedures (SOPs) for everything from client onboarding to marketing, you show that your success isn't accidental—it's systematic. Efficient, well-documented operations make a business more valuable because they reduce risk and make it easier for a new owner to step in and succeed. It’s proof that you’ve built a true business, not just a job for yourself.

What Are Intangible Assets, Really?

When you think about your business’s assets, you probably picture computers, office furniture, or maybe a company vehicle. But in a service business, the most valuable things are often the ones you can’t see or touch. These are your intangible assets, and they are the secret sauce that makes your company unique, profitable, and attractive to a potential buyer. They represent the hard work you’ve put into building something that’s more than just the sum of its physical parts.

Intangible assets are what give your business a competitive edge. They include your brand’s reputation in the market, your unique processes, the strength of your client relationships, and the expertise of your team. While you can’t put a simple price tag on them like you can a desk, a professional valuator knows how to measure their impact on your bottom line. Understanding these assets is the first step to seeing your business’s true worth.

Brand Reputation

Think about the brands you personally trust. You’re likely willing to pay a little more for their services because you know you’ll get quality and consistency. That’s the power of a strong brand reputation. It’s an asset that fosters incredible customer loyalty and allows you to command premium prices, which directly impacts your revenue and profitability. A good name in your industry means customers seek you out, employees want to work for you, and your marketing efforts are more effective. For a buyer, a business with a stellar reputation is a much safer and more valuable investment.

Intellectual Property

Intellectual property (IP) isn’t just for tech startups with groundbreaking patents. For a service business, your IP might be a trademarked brand name and logo, copyrighted training materials, a unique consulting methodology, or proprietary software you’ve developed to serve your clients. This kind of intellectual property creates a protective moat around your business, making it difficult for competitors to replicate what you do. This exclusivity is a significant value driver because it secures your market position and can create its own revenue streams, making your business highly attractive.

Customer Lists and Contracts

A potential buyer isn’t just acquiring your services; they’re acquiring your revenue streams. That’s why your customer base is one of your most critical assets. A diversified list of clients with a history of repeat business is incredibly valuable. Even better are long-term contracts or subscription agreements that guarantee predictable revenue. This stability reduces the risk for a new owner and makes your future cash flow much easier to forecast. A business that relies on just one or two major clients is seen as riskier than one with a broad and stable customer foundation.

Team Expertise

Your business is more than just you. The collective skills, experience, and knowledge of your team are a powerful intangible asset. A talented and efficient team that can operate smoothly—even without your daily oversight—is a huge selling point. It proves to a buyer that the business is a sustainable operation, not just a job that depends on one person. A skilled workforce drives innovation, delivers excellent service, and contributes to a positive company culture that can attract and retain top talent, ensuring the business continues to thrive through a transition and beyond.

Operational Playbooks

Imagine handing a new owner the instruction manual for your business. That’s essentially what your operational playbooks are. Having well-documented processes for everything from client onboarding to marketing campaigns to service delivery shows that your success is systematic and repeatable. These documented systems make the business far easier to transfer because they reduce the new owner’s learning curve and ensure consistency for both employees and clients. It proves that you’ve built a true business, not just a practice, and that makes it significantly more valuable.

Get Your Business Ready for Valuation

Getting a business valuation isn't a passive process. Think of it like preparing your house for a showing—you want to tidy up and present it in the best possible light. Taking a few proactive steps before the official valuation begins can lead to a more accurate and often more favorable outcome. Here’s a practical checklist to get your business ready for its close-up.

Gather Your Financial Documents

First things first, let’s get your paperwork in order. An accurate valuation is built on a foundation of solid financial data. You’ll need to pull together your key financial statements from at least the last year, but having three years of data is even better. Be prepared to provide clear numbers for your total revenue, the direct costs associated with delivering your services (cost of sales), and your ongoing operational costs, also known as overhead expenses. Having these figures clean, organized, and ready to go will make the entire process smoother and show any potential buyer or appraiser that you run a tight ship.

Take Stock of Your Assets

Next, it’s time to create a complete picture of what your business owns and what it owes. This is a core part of the asset-based valuation approach. Start by listing all of your company’s assets—this includes tangible items like equipment, vehicles, and property, as well as cash in the bank and accounts receivable. Then, make a list of all your liabilities, which are your business’s debts, such as loans, outstanding bills, and credit card balances. The basic formula is simple: the total value of your business's assets minus your total liabilities. This gives a baseline net value for your company.

Analyze Your Revenue Streams

Not all revenue is created equal in the eyes of a valuator. Take a close look at where your money is coming from. Do you rely on one-time projects, or do you have a steady flow of recurring revenue from ongoing contracts and subscriptions? Investors and buyers love predictability. If a significant portion of your sales comes from ongoing contracts, your business is seen as more stable and less risky, which directly increases its value. Highlighting the stability of your income is a powerful way to demonstrate the long-term health and potential of your business. It shows you’ve built a sustainable model, not just a series of successful projects.

Evaluate Your Customer Base

Who are your customers, and how much does each one contribute to your bottom line? It’s a critical question because customer concentration can be a major risk factor. If one or two major clients account for a large percentage of your revenue, your business could be in trouble if they decide to leave. A valuator will see this as a significant risk. On the other hand, a diversified customer base with no single client making up more than 10% of your revenue is much more valuable. It demonstrates stability and a wider market appeal, making your future cash flow appear more secure and reliable to an outsider.

Adjust for Owner's Compensation

If you’re a full-time owner-operator, it’s crucial to normalize your financials by adjusting for your own compensation and benefits. This process helps calculate your Seller's Discretionary Earnings (SDE), a key metric for valuing small service businesses. SDE adds back your salary, personal expenses run through the business, and other non-essential costs to the net profit. This adjustment shows a potential buyer the total financial benefit they would receive from owning the business. Getting a clear picture of your SDE is essential because it’s often the number that gets multiplied to determine your company’s final valuation.

Overcome Common Valuation Hurdles

Getting a business valuation can feel like preparing for a final exam—you know the material, but you’re worried about the tricky questions. Every service business faces unique challenges during this process, but they are rarely insurmountable. Think of these hurdles not as roadblocks, but as opportunities to get a clearer picture of your company’s strengths and weaknesses. Addressing them head-on doesn’t just prepare you for a valuation; it makes your business stronger, more resilient, and ultimately, more valuable. It's a chance to look at your company through the critical eyes of an outsider and make improvements that will pay off whether you sell tomorrow or in ten years.

Many owners get tripped up by the same things: trying to quantify intangible assets, explaining inconsistent cash flow, or dealing with a concentrated customer base. They might struggle to find relevant market comparisons for their unique business or overlook critical risks that a buyer would spot immediately. The good news is that none of these issues are deal-breakers if you handle them correctly. By understanding these common hurdles, you can proactively prepare your documentation and your strategy. This section will walk you through how to approach each of these challenges, turning potential valuation pitfalls into points of strength and confidence.

How to Measure Intangible Assets

It’s easy to value a delivery truck or a computer, but what about your stellar brand reputation or your secret-sauce operational process? Many owners mistakenly believe value is tied only to what’s on the balance sheet. The reality is that your business’s value is based on its ability to generate cash flow, and your intangible assets are often the engine driving it. Your brand, customer lists, and proprietary processes are what create sustainable revenue. A valuation expert will analyze how these assets contribute to financial performance, such as enabling premium pricing or creating high customer retention rates. The key is to document and demonstrate their impact on your bottom line.

How to Handle Inconsistent Cash Flow

If your cash flow has more ups and downs than a rollercoaster, you’re not alone. Many service businesses experience fluctuations due to project-based work or seasonality. A common mistake is to believe that future growth potential should overshadow past inconsistencies. While your pipeline is important, a valuation is grounded in historical performance and predictable earnings. To handle this, don’t hide the inconsistencies—explain them. Prepare a narrative that shows the trends over a three-to-five-year period. Highlight why the dips occurred (a one-time expense, a market shift) and how you’ve since stabilized operations. This transparency builds credibility and shows you have a firm grasp on your financial management.

Solving for Customer Concentration

Having a few big clients who pay on time feels great, but it can be a major red flag during a valuation. If more than 10-15% of your revenue comes from a single customer, it creates significant risk. What happens if you lose that client? A potential buyer will ask that question, and the perceived risk will lower your valuation multiple. The solution is diversification. Start building a strategy to broaden your customer base long before you plan to sell. This might involve exploring new markets, launching new service offerings, or investing more in marketing to attract a wider range of smaller clients. Showing a clear plan to reduce dependency on a few key accounts can help mitigate this concern.

Finding Good Market Comparisons

"My business is unique" is a common refrain from owners, and it's often true. This can make finding comparable companies, or "comps," a real challenge. It’s a myth that valuation professionals just find similar businesses and apply the same multiple. The art is in the adjustment. A good valuation considers how your business differs from others in the market. Instead of looking for a perfect match, an appraiser will identify companies with similar business models or risk profiles and then adjust the multiples based on your specific strengths and weaknesses. Your focus should be on clearly articulating what makes your business different and why those differences create value.

How to Assess and Address Business Risks

Every business has risks, from key-person dependency to changing market conditions. Many owners are so focused on the day-to-day that they underestimate the impact of these factors on their company's value. A crucial step in preparing for a valuation is to conduct an honest business risk assessment. Are you the only one who holds key client relationships? Is your technology outdated? Once you identify these risks, you can start addressing them. Documenting processes, cross-training your team, and creating contingency plans are all actionable steps that reduce risk. This proactive approach demonstrates stability and foresight to a potential buyer, directly increasing your business’s worth.

Actionable Steps to Increase Your Business's Value

Understanding your business's value is one thing; actively increasing it is another. The good news is that you don’t have to overhaul your entire company overnight. By focusing on a few key areas, you can make strategic improvements that have a real impact on your valuation. Think of these as investments in your company's future, whether you plan to sell tomorrow or ten years from now. These steps are about building a stronger, more resilient, and more profitable business that’s attractive to buyers and easier for you to run. Let’s walk through five practical ways you can start building more value today.

Diversify Your Revenue

Relying on one or two major clients for the bulk of your revenue can feel great when things are going well, but it puts your business in a precarious position. If you lose one of those clients, your cash flow takes a significant hit. A potential buyer will see this as a major risk. The solution is to build a more balanced portfolio of clients. A diversified customer base is far more valuable because it creates stability and proves your service has broad market appeal. Spreading your revenue across multiple clients reduces risk and makes your income streams more predictable, which is exactly what investors want to see.

Build Recurring Revenue Streams

One-off projects are the bread and butter of many service businesses, but they create an unpredictable revenue cycle. To increase your company’s value, focus on creating recurring revenue. This could look like monthly retainers, service subscriptions, or ongoing maintenance contracts. When a significant portion of your sales comes from these ongoing agreements, investors see your business as more stable and less risky. This predictability in income is highly valued because it demonstrates consistent cash flow and a loyal customer base. It shows that your business isn't just surviving from one project to the next—it's built for sustained success.

Streamline Your Operations

How easily could someone else step in and run your business? If the answer is "not very," it's time to streamline your operations. This means documenting your core processes, from how you onboard a new client to how you handle invoicing. When you have efficient, well-documented systems, the business becomes less dependent on you as the owner. This not only makes your company more valuable but also makes it much easier to transfer to a new owner. Streamlining your operations often leads to cost savings and better service delivery, creating a more efficient and profitable business that runs smoothly, with or without you at the helm.

Create Scalable Systems

A scalable business is one that can handle growth without a proportional increase in costs or chaos. This is where systems and technology become your best friends. Implementing software for scheduling, project management, and invoicing doesn't just make your life easier; it builds value. Having clear, efficient ways of doing things shows a potential buyer that your business is prepared for growth. Scalability is a huge factor in valuation because it points to future profitability. It proves that you’ve built a machine that can grow, not just a job that depends on your personal effort.

Strengthen Client Relationships

In a service business, your relationships are one of your most valuable assets. Happy clients don't just come back for more; they become your best source of referrals. Providing excellent service builds loyalty and directly contributes to your business's value. Strong client relationships lead to repeat business and positive word-of-mouth, which are essential for long-term, sustainable growth. Make it a priority to check in with your clients, gather feedback, and consistently deliver work that exceeds their expectations. This focus on customer satisfaction creates a loyal following that a new owner would be thrilled to inherit.

How to Work with a Valuation Professional

Getting a business valuation can feel like a major step, but it doesn't have to be intimidating. Think of it less as a final exam and more as a check-up that gives you a clear picture of your company's health. Working with a professional isn't just about getting an accurate number; it's about gaining a strategic partner who can help you understand the story behind that number. They can translate complex financial data into a clear narrative about your strengths, weaknesses, and opportunities.

This process is designed to give you clarity and confidence. A valuation expert will dig into your financials, market position, and operational structure to provide an objective assessment of what your business is worth. This insight is invaluable, whether you're planning to sell, seeking investment, or simply want to create a roadmap for future growth. By partnering with the right expert, you transform a potentially stressful process into an empowering one, equipping you with the knowledge to make smarter, more strategic decisions for your company's future.

Find the Right Expert for Your Business

Finding the right professional starts with knowing your goal. If you’re simply looking for a baseline value for internal planning, your accountant or a certified business valuator (CBV) can prepare a detailed report. They specialize in the technical analysis of determining a company’s worth.

However, if you’re thinking about selling your business, you might want to work with a mergers and acquisitions (M\&A) advisor or a business broker. These experts not only determine your company’s value but also guide you through the sales process, from marketing your business to negotiating the final deal. The key is to find someone with specific experience valuing service-based businesses like yours, as they’ll understand the nuances of your industry.

What to Expect During the Valuation Process

Once you’ve chosen an expert, the valuation process typically follows a few key steps. It usually begins with an initial meeting where you’ll discuss your business, your goals, and the scope of the valuation. Next comes the information-gathering phase. You’ll be asked to provide a range of documents, including financial statements, tax returns, client contracts, and employee information.

Your valuation professional will then perform a deep analysis of this information, applying various valuation methods to arrive at a conclusion. This isn't a quick calculation; it's a thorough process that requires careful consideration of your company's unique characteristics. Finally, they will present their findings in a comprehensive report and walk you through it, ensuring you understand how they reached their conclusions.

How to Read Your Valuation Report

Your valuation report is more than just a single number; it’s a detailed analysis of your business. To get the most out of it, you’ll want to understand its key components. The report will almost always include a breakdown of your company’s financial performance, an assessment of current market conditions, and an analysis of comparable sales data from similar businesses.

Don’t just flip to the last page for the final number. Take the time to read through the analysis. Understanding these different sections will help you see exactly how the final value was determined. If anything is unclear, ask your valuation professional to explain it. The goal is for you to feel confident in the report’s findings and the story they tell about your business.

Use Your Report to Make Smarter Decisions

A business valuation is a powerful tool for strategic planning. Once you know what your business is worth and why, you can make much more informed decisions about its future. The report provides a clear, objective look at your financial health and can highlight areas for improvement. For example, it might reveal that strengthening your recurring revenue streams or diversifying your client base could significantly increase your company’s value.

Whether you're considering a sale, planning for an acquisition, or setting goals for the next five years, the valuation report should be your guide. It gives you a baseline to measure progress against and helps you focus your efforts on activities that will create the most value over time.

Frequently Asked Questions

How often should I get my business valued? Think of a business valuation as a regular health check-up, not a one-time event you only do before a sale. A good rule of thumb is to get a formal valuation every two to three years. You should also consider one after any major event, like landing a massive long-term contract, losing a key employee, or making a significant operational change. This regular pulse-check helps you track your progress and make smarter strategic decisions based on your company's current worth, not what it was worth years ago.

Is one valuation method better than the others for my service business? There isn't a single "best" method, and that's actually a good thing. A credible valuation professional won't just pick one formula and call it a day. Instead, they will likely use a combination of approaches, such as Seller's Discretionary Earnings (SDE) and a market comparison, to arrive at a defensible value range. Each method provides a different perspective, and looking at them together creates a much more complete and accurate picture of your company's true worth.

My business depends heavily on me. How much does that hurt its value? This is one of the most common hurdles for service business owners, and yes, it can significantly impact your value. A business that can't function without its owner is seen as a major risk to a potential buyer. They are buying a company, not just buying you a job. The best way to counter this is to start building systems and processes that prove the business can thrive on its own. By documenting your operational playbook and empowering your team, you demonstrate that you've built a sustainable asset, not just a personal practice.

What's the biggest mistake owners make during the valuation process? The most common mistake is having messy or disorganized financial records. A valuation is built on a foundation of trust, and that trust begins with clean, clear financials. If you can't easily produce accurate statements or explain the story behind your numbers—the highs, the lows, and the reasons for them—it creates doubt and uncertainty. An appraiser or buyer will assume the worst if the information is confusing, which can directly lower the perceived value of your business.

Besides selling, what are other good reasons to get a formal valuation? A valuation is a powerful strategic tool far beyond planning an exit. You might need one to secure a business loan or line of credit, as banks want to see a clear assessment of your company's worth. It's also essential for partnership agreements, like planning for a partner buyout or bringing on a new one. Furthermore, valuations are often necessary for estate planning, gift tax purposes, and even in the unfortunate event of a divorce. Knowing your number gives you clarity and leverage in many different business and personal situations.

Brad Parker