How long is a business valuation good for?

There is no expiry date on a business valuation that the sources we checked set. A valuation reflects the business and the market as of a stated date, and the useful question is whether that date is still close enough for what you need it for. Different readers will answer differently, so find out who relies on it before you decide whether to refresh it.

Why a valuation ages

BDC says valuation is not an exact science and that a company’s value can change for many reasons, including market conditions, new regulations and sales trends. Where earnings-based methods are used, BDC says a valuator reviews forecasted earnings or cash flow and past results, so new results may change the inputs.

A range and a guideline

BDC’s glossary says the information from each approach is combined to establish a range of values for the business. BDC also says the final transaction price is often different, influenced by things such as eagerness to sell, the buyer’s strategic interests, available financing and due diligence. A valuation that was a fair guide last year may be a weaker guide now.

Ask who relies on it

The CBV Institute says that before you go to market, or make or accept an offer, you need a defensible valuation. It also says acquisitions and corporate year-ends often trigger valuation requirements under accounting standards, and that tax events call for a supportable value. Ask whoever will rely on it, such as a buyer, lender, auditor or tax adviser, what date and what update they need, and ask the valuator whether the report can be updated or brought forward.

When to consider a refresh

Consider asking about an update when the business changes, a sale or transfer gets closer, or the market moves. For the timing of a deal once it is signed, see how long closing takes.