After pouring your heart and soul into your business for years, the time to exit is finally here! But before you proceed, you'll need to understand the business’s value and how much the valuation will cost you.
Understanding the cost of a business valuation isn't just about the potential amount you need to pay — you'll also know why the charge matters and how it can affect how much you keep from the sale. There's even more you need to know!
In this business valuation cost guide, we'll discuss how much you can expect to pay to have your business valued, the factors that drive the cost, and what to consider before hiring a valuer.
You can expect to pay around $2,000 to $10,000 for a small business valuation, while a larger and more complex business can cost you up to $100,000 or more.
In some instances, you can have your business valued for free.
Business valuation costs depend on factors such as:
We'll discuss the cost range and driving factors in detail in other sections. In the meantime, we at Exitwise recognize that finding the best valuer for your business can be difficult.
That’s why we can help you hire the right valuation experts, such as an M&A advisory firm, business appraiser, investment banker, or business broker.
Besides giving you a transparent valuation, these professionals can help you sell your business successfully at the highest sale price possible. Consult with our team today!
A business valuation is a qualitative and quantitative analysis of a business to determine its worth.
Also called a company valuation, the process is completed by a third party on your behalf to maintain objectivity.
The right valuation method is critical in understanding your business's worth and potential.
Here are the steps to choose the right method:
Business valuations are essential in the following ways:
As mentioned, business valuation service costs depend on various factors.
Here are some of the major factors:
Your timeline for the valuation is one of the most influential factors.
If you need a faster valuation, you'll have to pay more since the valuer will have to plan their workflow to accommodate the urgency while maintaining transparency, accuracy, and professionalism.
One valuation can be more resource-intensive and rigorous than another, depending on the depth of financial analysis required, valuation method, and resources needed.
For example, a valuation requiring just one valuation method generally costs less than a complex one. The typical starting rate for an asset-based valuation is $5,000, while income-based valuations typically start at $10,000.
If the valuation calls for more than one method, the cost rises. The typical starting rate for such valuations is $10,000.
The cost may rise even higher if the valuer has to simulate different possibilities based on certain variables to give you worst-price, fair-price, and best-price scenarios.
Most valuations are either for internal continuous assessment or pre-sale purposes. Generally, a valuation for internal purposes such as decision-making or value improvement costs less.
If you are looking to sell, the business value fees can be higher. You can also expect higher fees if the valuation is a legal requirement, such as by the IRS regarding tax issues.
Valuing a larger business is usually more expensive because it requires more time, labor, and other resources. A business with multiple departments and locations will cost more to value.
Your business’s industry also matters. According to NYU Stern, some industries are notoriously difficult to value, such as financial service firms and commodity businesses.
A business appraiser with many years of experience and expertise typically charges more for business valuations than someone newer or just getting started.
For instance, certified valuers charge $5,000 to $30,000 and even more.
A specialized firm or individual offering only business valuations may also be costlier.
Your preparedness as a business owner has to do with how well you've put your financials in order before a valuation.
For example, it's important to regularly and accurately track your inventory, sales, and the cost of goods sold. You also want your financial statements ready for the last 3-5 years.
Suppose you use many business resources for personal needs. You'll need to account for these to reduce the time the valuer spends trying to determine your business's health and performance.
Ultimately, the more prepared you are with the documents, the less time the evaluator will need to collate them, possibly reducing some of the cost.
Looking for a quick estimate of your business’s worth? Check out our free online valuation calculator to get an idea of how much your business is worth.
Several industry standards influence your valuation pricing. Here are the ways they shape how you assess your company:
If your business is in industries with strict compliance and regulatory requirements, such as healthcare and finance, you can expect a higher valuation cost.
The valuation expert must conduct thorough due diligence by checking your licenses, analyzing your certifications, and reviewing your legal documents to prove your business is on solid ground. They are likely to ask for a higher fee due to the additional time and complexity.
If you have patents, trademarks, or proprietary tech, the valuation requires special expertise and extra analysis. All of that elevates your valuation costs.
Suppose your business runs on tribal knowledge where your critical processes exist in your team's heads instead of clean standard operating procedures (SOPs) and records. In that case, it can take your appraiser extra time and effort to understand how your business operations work.
That extra time shows up on your valuation costs. So, having clear documentation not only increases buyer confidence but can also save you money in the valuation process.
If your accounting books have various non-recurring expenses like perks, one-time fees, and personal vehicles, the professional has to verify them.
The process can take longer, which can result in the valuation professional charging more, especially if your financials are complex and messy.
Each of the business valuation methods, like the asset-based, income-based, and market-based, requires time and expertise. Depending on the method you choose, you can add a layer to the final valuation cost.
In stable industries, a professional has a lot of data to compare with, which makes the valuations faster and cheaper. However, if your business is in an emerging industry, it is scarce to get reliable data. The appraiser thus spends more time sourcing benchmarks and testing assumptions, which can push the valuation costs.
If you need valuations that comply with professional and ethical standards, you need to hire certified appraisers with ASA and CVA credentials and follow USPAP standards. These experts typically charge more.
In addition to the above costs, some more direct and indirect expenses contribute significantly to the overall valuation costs.
Let’s look at some of them:
We've mentioned that a business valuation can be free or cost $2,000 to $10,000 and even $100,000 or more. Most valuators charge this at a flat project rate or an hourly rate.
Here's a quick overview of the typical costs:
Free valuations are common when the valuer is uncertified or handling the process for a small business.
Most brokers also offer free valuation services to potential clients to sweeten the pot and increase the chances of signing the client. The hope is that they will successfully sell your business and earn a commission.
Here are some key points to consider to ensure you minimize the costs of your valuation:
Before you even reach out to a valuation professional, make sure your financials are clean, complete, and reconciled. When you organize your income statements, balance sheets, and cash flow records, you save time and money.
Are you selling, raising funds, or just checking your business value? Knowing exactly why you need the valuation helps the professional focus only on what's necessary, avoiding extra work (and extra fees).
Not every valuation method fits every business. If revenue multiples are most relevant, there's no need to pay for a complete asset-based analysis. A restricted-purpose report can be just as reliable and much more cost-effective.
Give your appraiser industry comps, market reports, and prior valuations. Using standardized templates and relevant benchmarks reduces custom work and speeds up the process.
Run a DIY valuation first and get a rough estimate that provides a baseline that your professional can refine. This approach cuts hours and costs without sacrificing accuracy.
If you need multiple valuations (for investors, partners, or succession planning), ask for a package deal. Working with the same firm over time can also secure better rates.
Experience matters, so you can consider a mid-tier professional with relevant industry experience to deliver accurate results without the high price tag. Just make sure they follow recognized standards such as the ASA, NACVA, and CVA.
You'll need to consider several aspects before you hire a business valuer.
Let's check out the main ones:
Hiring the best valuer isn't a walk in the park. You may be lost for options regarding the type of valuer your business needs.
When you work with us at Exitwise, we can help you interview professional valuers such as business brokers, investment bankers, business appraisers, and M&A firms.
We can help you hire and manage the best professional based on your business needs.
For example, if you plan on selling the business, it would be better to hire an M&A firm. You'll not only get help with the valuation but also throughout the entire sales process.
Schedule a chat with our team today to get started.
Let's close the guide with a few questions you may have concerning business valuations:
Business valuations can be placed in different categories, such as:
A business valuation report is usually free because the final physical or digital documentation shows the valuation results. Your valuer has to give you the analyzed results, and the cost is usually included in the valuation fee.
In most cases, the "business valuation report" refers to the entire valuation, and prices may be quoted with this in mind.
You can expect the following components in a typical business valuation:
If you’re valuing your business for sale, balancing business valuation costs with urgency and objectivity can help you maximize its value and achieve a successful sale with the best purchase price possible.
For this to happen, you'll need to hire the right valuation experts. At Exitwise, we can help you hire and manage experts who will help you with the valuation and make a successful sale.
Reach out to us today to find the best valuer and successfully sell your business.
Let Exitwise introduce, hire and manage the best, industry specialized, investment bankers, M&A attorneys, tax accountants and other M&A advisors to help you maximize the sale of your business.
