Is it worth paying for more than one valuation before listing my business?

Paying for a second valuation is a decision about purpose and cost, not about finding a better number. A valuation answers a particular question for a particular reader, and a different question can justify a different report. BDC notes that business owners can have many reasons for wanting to know what a company is worth. Before you spend money again, decide what the first report cannot do for you. This is general information and does not tell you whether to list or sell.

Why two valuations can differ

BDC says each valuation method may yield a different value, and that different earnings-based approaches are used depending on whether earnings are expected to be stable. It also says valuations are done with varying levels of detail, each with a different cost and level of assurance. A gap between two reports may therefore reflect method, detail or purpose, rather than a mistake in either one.

What a second report can and cannot do

BDC says it is common for owners to have a different value in mind than potential buyers, family successors, financial partners or tax assessors, and that the most suitable combination of approaches depends on the purpose of the valuation and the company’s profitability, outlook and asset mix. A second report built for another purpose can be useful. It cannot set the price. BDC adds that the final transaction price is often different, shaped by factors such as the seller’s eagerness, the buyer’s strategic interests, financing and due diligence.

Questions to ask before paying again

• What was the first report for, and what level of detail and assurance did it carry?
• Who is the second report for: you, a family member, a lender or a buyer?
• Would a different method or date change the answer, and why?
• Who prepared it? BDC says hiring a chartered business valuator is helpful, and lists trying to do your own valuation among five mistakes to avoid.

BDC’s buyer guide says professional valuators commonly use multiple valuation approaches to confirm a fair price. BDC’s list of valuation mistakes includes expecting a valuation to stay the same, so check the date of any report you rely on. For the first step, see how to get a valuation before selling.