What does a business valuation report include?

A valuation report is the written result of a valuator’s work. Nothing makes every report the same, and BDC notes that valuations can be done with varying levels of detail. If you are an owner about to commission one, knowing the parts to look for helps you ask for the right thing. This page covers what to expect in the report; how to read one is in how to read a business valuation report.

The level of detail

BDC says valuations come in different levels of detail, and that each comes with a different cost and level of assurance that the result accurately reflects your company’s worth. Check that the report says which level it is, and ask the valuator to explain what that level does and does not give you before you rely on it.

The methods used

BDC describes three main methods: earnings-based, market-based and asset-based. It says a valuator may use one or more of them depending on available information and the type of business and transaction, and that each method may yield a different value. Ask the valuator to show which were used and why.

The conclusion

BDC says valuators generally offer a price range that the company would probably sell for to an arm’s-length party, and that smaller companies and some sectors can expect a wider range. The CBV Institute says its Practice Standards, which are mandatory for CBV professional practice, address how conclusions are communicated and the nature of file documentation to be maintained. Ask whether the report is prepared under those standards.

What you supply

BDC says valuators often need to make on-site visits, meet key personnel and ask follow-up questions, and that you must be ready to share detailed information about the company. Ask the valuator how any gaps in your records would affect the conclusion.