Business Appraisal FL|GA has designed this decision tree to help you get the most value for your time and investment and to understand business appraisal pricing and what a business valuation costs. We want you to see the fair market value of your business.
How Much Should I Spend on a Business Appraisal?
How Much Does a Business Valuation or Business Appraisal Cost?
Table of contents
- How Much Should I Spend on a Business Appraisal?
- How Much Does a Business Valuation or Business Appraisal Cost?
- What Should I Pay for a Business Valuation?
- Question #1: Is it for the Courts or the IRS?
- Question #2: Is it for a bank to make a loan?
- Question #3: Are you selling your business to a family member?
- Question #4: Are you selling the business to your employees?
- Question #5: I am buying a business
- Question #6: I want to know the ballpark value of my company every few years
- Question #7: I received an unsolicited offer for my business.
- Question #8: I have a great idea, and I want to use a hypothetical valuation to approach investors.
- Questions about business valuation cost
What Should I Pay for a Business Valuation?
Pricing to value a company varies from $2,900 to $10,000 for most business owners. How do you decide the appropriate valuation type and cost for you? Business Appraisal FL|GA|HI has created this decision tree to help you maximize value and understand business appraisal pricing and the fair market value of your company. Learn more.
Please read what is a business valuation to learn more about business valuations and what a business owner receives from a certified business appraiser.
Question #1: Is it for the Courts or the IRS?
Do you need a business valuation for IRS purposes? The IRS and courts have a certain minimum standard when it comes to valuing a company. These certified valuation reports are typically 60-100 pages long, valuing your business using at least 4-7 different valuation methods, including the asset, approach, market approach, and income approach. The certified valuation expert signing the valuation would be comfortable testifying in court, presenting their finished product and all work notes created during the valuation engagement.
You can also read IRS business valuation guidelines written by our business valuation professionals and staff business appraisers or CVA.
If the valuation is for litigation or a divorce, you need a certified business valuation report to the court’s standards. You will also need a personal goodwill allocation if your state allows it under your state’s marital asset laws. If your business has intellectual property or other intangible assets on the balance sheet, you may need a more robust valuation, too.
Business Valuation Cost $5,300-$13,000 plus court time (if needed)
Question #2: Is it for a bank to make a loan?
SBA lenders have minimum standards they ask for from approved valuation firms. These reports can be from 40-60 pages long and signed by a CVA or similarly credentialed valuation professional. The valuation firm has some liability if the loan goes bad and their valuation services are questioned. Tax returns and solid financial statements are critical components to show that there is enough cash flow to cover loan payments.
BA FL|GA|HI is an approved SBA business appraiser firm with years of of small business lending business appraisals.
We have an article on business valuation reality check which shows that a loan will cash flow based on the final business appraisal numbers. You can also read our article about business valuations for SBA loans, and please request a sample SBA valuation.
Valuation Cost $2,700-$6,700
Question #3: Are you selling your business to a family member?
I buy a new Lexus for $100,000 and sell it to you for $1. I am a nice guy. You buy a Lexus for $100,000 and sell it to one of your children for $1. The IRS wants to be paid on the $99,999 gift tax.
Moreover, if the transaction is not arms-length, then you will need a certified valuation and a goodwill allocation just in case the IRS investigates your family transaction after the fact. This also holds true if you are transferring your shares into a trust for the benefit of your family.
You can also read should you get an appraisal of your family business when exit planning and the steps to perform a business valuation.
Valuation Cost $5,000-$13,000
Question #4: Are you selling the business to your employees?
If you are a large enough business, you can use an ESOP as a vehicle to sell to your employees. If you are less than $20,000,000 in sales, you can have your company valued, arrange pre-financing for your management team, and consummate the sale. Our sister company Bankers Advocate can help you with both a family transfer/sale or a sale to your key employees.
Valuation Cost $5,300-$13,000
Question #5: I am buying a business
The size of the target company and whether you are using SBA or bank financing will determine the complexity of the business valuation report required. Larger businesses with complicated financing and deal structures need a more robust valuation done with fraud and other due diligence. A small business valuation will need less data, but the financial information might be sketchy. Here is a Due Diligence checklist our sister company, Bankers Factoring, uses.
Business brokers often reach out to us for their buy-side valuation needs.
Valuation Cost $3,100-$9,000
Question #6: I want to know the ballpark value of my company every few years
If you are a small business or do not plan to exit business ownership for a few years, you may be interested in knowing the estimated market value of your business for retirement planning or a future sale. While a business broker can provide a free estimate of your business’s selling price, it’s important to consider that you may get what you pay for.
You also may want to issue key employees’ phantom stock or have a buy-sell agreement that has not been triggered, but you still need to know the company’s worth and the potential to sell your business.
For more information on valuating a small business, you can refer to the different methods used by business appraisers here.
Valuation Cost $1,900-$4,100
Question #7: I received an unsolicited offer for my business.
If it is a serious buyer offer, you can have a medium-priced certified valuation done pre-business sale. However, be careful. You are only talking to one buyer, so they are driving the transaction. Require an NDA and proof of financing. Once these are provided, you can invest in a certified valuation, which includes a market approach, business comparisons, and cash flow analysis.
Valuation Cost: $3,700-$6,700
Question #8: I have a great idea, and I want to use a hypothetical valuation to approach investors.
A hypothetical valuation is performed to show an angel investor or family member how you expect your business to grow with their investment. The investment can be in the form of equity, financing, or a combination of both. We have a detailed article on valuing pre-revenue start-ups.
The results of the valuation process will be driven by your projected growth and our research on similar companies with similar growth projections. We will also consider your intellectual property.
Valuation Cost: $5,200-$8,900 (Hypothetical Valuation)
There are many reasons to have your business valued. This covers most of what we have seen in the last 20 years. Whether you need a business appraisal for IRS purposes, selling your company, or other reasons, gather your financial statements and other valuation data. Business Appraisal FL|GA|HI can have a zero-commitment discussion about your situation and appraisal cost.
And the free valuations from a business broker? You get what you pay for, and they are good for cocktail conversations at best.
Questions about business valuation cost
We hope we have answered your questions on how much a business valuation costs. Business owners need to know the fair market valuations of their company in a fast and cost-effective manner from a certified valuation analyst.
No matter your starting point for a business appraisal, we stand ready to help anywhere in the United States with our accredited senior appraiser or CVA to help you understand the value of your business.
At BA FL|GA|HI, all of our team members are certified business appraisers or certified valuation analysts (CVA). We provide reliable and credible business valuations that can be used in any setting. This article aims to provide you with a better understanding of the cost of a business valuation based on your specific requirements, the valuation fee, the valuation process, and the fair market value of your company.