Comparables valuation

There are 26.5 million businesses in the U.S., with around 543,000 new ones popping up every month — and more than that closing their doors for good.

A business appraisal valuation can be important for companies who are looking to sell their business, or for tax purposes, stock appraisal, or litigation concerns. But other than these obvious circumstances, when might you need a business valuation — and do you really need to pay a business valuation firm thousands of dollars to do it for you?

The answer is: Well, maybe. There are many factors that go into a business appraisal valuation, not least of all your need for a valuation itself. That may be surprising, but in the end, this process of measuring the worth of your company rests on two principal factors: how you measure business value and the circumstances under which you measure. In the professional lingo, these are what’s known as the “standard of value” and the “premise of value.”

In other words, your comps valuation is likely to change at different points throughout your career, and even from month to month. It’s also possible that you could have multiple values at the same time. Value is simply determined by estimating what a hypothetical buyer might pay for your business. In some cases, that depends on the buyer as much as it does the company.

This may seem complicated — which is exactly why many companies are wiling to shell out anywhere from $3,000 to $50,000 for proper business appraisal services, especially before a sell.

But if you’re not planning on going anywhere for a while, there’s still good reason to think about getting a business appraisal valuation. Many owners, especially of small businesses, have no real idea what their company is actually worth. Yet so much of their assets and efforts are built up in that one single enterprise. What if anything should happen to it — or to you?

You don’t necessarily need to hire a fancy service to get a rough estimate, though. As long as you have the proper paperwork and a little bit of time on your hands, you can find online business valuation software to help you calculate your estimated worth. But for a precisely accurate count, it’s best to leave it to the professionals.