Given the high-stakes decisions that hinge on an accurate valuation—such as ownership transfers, tax planning, litigation, or securing capital—choosing the right professional is critical. After all, it’s in your best interest to work with a qualified, credentialed valuation expert to ensure you receive a defensible and well-supported assessment of your business’s worth. If key business characteristics are missed, the valuation conclusion may be materially distorted, undermining strategic decisions and stakeholder confidence.
We recommend seeking out professionals with both valuation credentials (such as ASA, CVA, ABV, or CFA) and real-world experience relevant to your industry. The most qualified practitioners maintain strict independence and objectivity throughout the valuation process—free from bias or external influence. Additionally, they should have the ability to clearly explain and defend their conclusions in settings such as tax audits, shareholder disputes, and litigation.
Factors Considered in Professional Valuations
Professional valuation experts examine a broad spectrum of financial and operational factors to ensure that the final conclusion reflects your business’s true economic reality.
Key considerations include:
- Historical and Projected Financial Performance
- Current Industry Trends and Competitive Landscape
- Operational Strengths, Weaknesses, and Scalability Potential
- Customer Base Diversity and Concentration Risks
- Vendor/Supply Chain Dependency and Resilience
- Proprietary Technology, Trademarks, and Other Intangible Assets
- Proportion of Recurring vs. One-Time Revenue
- Earnings Stability and Volatility
- Capital Structure and Degree of Financial Leverage
- Management Depth and Succession Readiness
- Owner Dependence and Key Person Risk
- Product/Service Line Diversification and Innovation Pipeline
- Emergence of New or Disruptive Competitors
These factors inform not only the choice of valuation method (such as the income, market, or asset approach), but also influence inputs like discount rates, market multiples, and normalization adjustments.
The Dangers of an Inaccurate Valuation
The implications of a flawed valuation go well beyond theoretical concerns. An undervalued business could miss out on millions during a sale, undervalue equity in gift or estate planning, or struggle to attract investors. Meanwhile, an overvalued business might derail a transaction, mislead internal planning, or provoke scrutiny from regulatory authorities.
Inaccurate valuations may also distort decisions related to equity compensation, partnership buyouts, or strategic investments. For closely held businesses, especially family-owned entities, this can sow discord among stakeholders and compromise long-term planning efforts.
Well-executed valuations do more than assign a price—they provide clarity and confidence. They help owners understand where value is being created (or destroyed), set realistic growth targets, and enable informed decision-making at critical junctures.
Benefits of a Valuation
A professional business valuation delivers far more than a single number—it offers a strategic lens into the drivers of enterprise value and the risks that may erode it. While some business owners view valuations as necessary only during sales or disputes, this mindset misses their broader utility.
Routine valuations can:
- Help track progress toward business and financial goals
- Identify operational inefficiencies or risk concentrations
- Support capital budgeting and resource allocation decisions
- Enable proactive planning for ownership transition, exit strategies, or estate matters
By working with credentialed valuation professionals who understand your business model and industry dynamics, you can gain actionable insights that support both short-term decisions and long-term planning. In today’s uncertain and competitive business environment, this knowledge represents one of the most valuable assets a business owner can possess.
If you aren’t sure where to start when valuing your business, we have a blog post explaining the valuation process. Our valuation team is also ready to answer any valuation questions you might have.
