Business Valuation 101

Sofer® Advisors demystifies the process for busy leaders and entrepreneurs. Contact us for actionable intelligence—in plain English.

Objective, Unbiased Insights

Tailored Expertise

Strategic Valuation

Business valuation seems complex. We make it clear.

Many of our clients are small-to-midsize business (SMB) owners who’ve never needed business valuation services before. Whether you run a family-owned operation or a massive conglomerate, you will need to know exactly what it is worth at some point in your business’ life.

We make that process as clear as possible—walking valuation veterans and first-timers alike through it all so you understand what your business is worth and how insightful intelligence from valuation experts can take it to the next level.

What are business valuation services?

A business valuation assesses your company’s financial worth. Many small to mid-sized business (SMB) owners think they are too small to need or afford valuation services, but valuation specialists provide crucial services to help SMBs plan long-term strategies, secure finances, handle mergers and acquisitions, and maintain legal compliance.

Business valuation services don’t just attach a dollar amount to your company—valuation specialists can help business owners like you grow your organization’s value.

Why must a third party perform business valuation?

Business valuation isn’t something that should be done in-house. By trusting a neutral, third-party firm to perform the valuation, you remove all questions of bias or subjectivity from the equation—which is helpful for strategic planning, mergers and acquisitions, and other use cases in which you want the clearest and most objective possible picture of your business’s value. Neutral, third-party insight is especially helpful in mediating business disputes, where neither party wants the person performing the valuation to have a thumb on the other side of the scale.

Why do SMBs need valuation services?

Many SMB owners assume that valuation services are too extensive and not applicable. The truth is large and enterprise-level businesses aren’t the only ones who must truly understand their company’s value. All businesses benefit from an accurate, objective appraisal conducted by a neutral third party!

There are many reasons to pursue a business valuation, but the three most common are:

  • Financial reporting or tax compliance
  • Amicable transactions such as a merger or sale, ownership transition, or buy-sell trigger
  • Conflict resolution, such as shareholder disputes or marital and business divorces

A business valuation also helps SMBs develop data-driven long-term strategies for success.

When do you need a business evaluation?

  • To determine if your business’s operation and growth strategies are translating into real value
  • You want to attract outside capital investments, fueling expansion and growth
  • You have decided to sell your business and want to determine a fair price
  • You need to know if an offer to buy your business is reasonable
  • To determine out the appropriate insurance coverages your business needs to protect its value drivers
  • To satisfy accounting, tax, and legal requirements based on your business’s size, location, and industry
  • To resolve a legal dispute related to your business, such as a shareholder conflict, insurance claim, or a divorce between two business owners

Is business valuation a formal process?

Certified business valuations are a formal process examining every aspect of your company to assess your business’ value.

It provides credible and transparent results that lenders, investors, potential buyers, and other stakeholders can trust.

Are there different types of business valuation?

There are two types of certified business valuations: a thorough, rigorously documented Opinion of Value and a less rigorous Calculation of Value.

Opinion of Value

The Opinion of Value is the most thorough and rigorous. Our team goes through your business with a fine-toothed comb. The resulting valuation meets the high standards necessary for accounting, tax compliance, and other legal purposes.

Calculation of Value

Calculation of Value is faster and less costly than Opinion of Value. Ideal for amicable transactions, mediation assistance, and strategic planning, it provides an accurate valuation. Still, it does not include the detail necessary for tax compliance and/or the legal purpose.

An informal analysis provides a less thorough understanding of valuation—with nonetheless useful insights for strategic planning and/or conflict resolution.

How long does a business valuation take?

A formal business valuation takes a close look at all of the determinants of your business’s value. Every business is unique, and so is every valuation process.

On average, a formal valuation can take four to eight weeks, depending on the size of the company, how long it takes for our clients to provide the company background, documents, and other information we need, and other factors.

At the beginning of our process, we’ll provide a comprehensive list of all the materials we need, working closely with you to deliver a timeline upfront.

If you need the valuation on a tight deadline (i.e., an upcoming merger or acquisition transaction, court proceeding, or a tax or audit deadline), we can expedite for a fee. Conversely, if you don’t mind slowing down the valuation process, it can reduce costs.

What are the benefits of a professional business valuation?

Formal and even informal assessments are key to understanding the state of your company and where it’s headed. Benefits include: more accurate financial decisions and strategic planning, better risk management, improved financial opportunities, and the expansion of competitive advantages.

  • Empower accurate financial decisions: A professional business valuation helps SMB owners make smarter, planful decisions driven by data.
  • Optimize tax planning: Accurate valuations ensure correct tax calculations, preventing you from overpaying or underpaying.
  • Inform strategic planning: Knowing your company’s value and what factors contribute to that value presents clearer strategic opportunities.
  • Manage risks: Uncover dangers and weaknesses you’ve never considered. Fix things before they go wrong.
  • Improve financing efforts: SMBs that know their worth can more easily secure funds to expand their operations.
  • Plan smoother exits: For SMB owners intending to exit, an accurate valuation sets realistic expectations for sales or business succession.
  • Gain competitive advantages: A business valuation positions you to make better decisions, seize growth opportunities, and stay competitive.

How often should a valuation be performed?

Your company’s worth changes over time. By performing periodic valuations, you can better track how your decisions affect your valuation, informing future risks and opportunities.

Also, a valuation should always be performed ahead of a sale, merger, acquisition, or shareholder conflict so all parties can operate on the same objective set of facts.

What sets Sofer® Advisors apart for SMB valuations?

Too many SMB owners forego formal or informal valuations because they assume valuation expertise is strictly for big business, they feel intimidated by the process, or have had bad experiences with valuation firms applying a generic cookie-cutter approach.

At Sofer® Advisors, we’re focused on providing expert valuation services for businesses of all sizes—with special expertise tailored to the unique needs of small-to-midsize businesses. Our team guides and educates SMB owners on how to leverage their valuation into actionable intelligence to improve their company and their bottom line.

We work with you every step of the way to ensure you understand the entire process and to maximize benefits received. Beyond providing valuation services, we offer comprehensive consulting and guidance to transform insights into action, driving strategic planning to grow your business.

How do I get a business valuation from Sofer® Advisors?

To move forward with a formal or informal valuation for your business, contact us to schedule a free initial consultation. We’ll use our consultation to assess your business’s unique needs and the ultimate goals of your valuation, determine what information and documents we need from you to move forward, and estimate the timeline and cost for our valuation services.

If you’re ready to move forward or still have questions you need answered, contact us for a prompt and helpful response today.