AMB Performance Group Blog

How Much Does a Small Business Valuation Cost?

Posted on: June 29, 2022
Business Valuation

If you are thinking about buying or selling a business, and you’re serious about it, then you’ve probably wondered: how much does a small business valuation cost? 

Imagine this scenario. You’re at a conference when suddenly you’re approached by someone who is very interested in your company. In fact, they might like to make you an attractive offer. What price would you take to sell your company? It likely depends on what your company is really worth, and if you’re not quite sure what that number is right now, it may be time to look into a business valuation. 

What is a Professional Business Valuation?

If you’re unfamiliar with the process of business valuation, it’s essentially a way for an independent professional to offer you a solid number on the worth of your company. Usually, an appraiser will value your intangible assets like your copyrights, trademarks, and the like, as well as your physical assets. Then they look at your costs, profits, and potential threats to come up with a comprehensive analysis of what your company is truly worth. 

How Much Does a Small Business Valuation Cost?

There are actually a number of factors involved with the cost of a business valuation report. The biggest of those is the reason you are having your business valued in the first place. If, for example, you’re just curious because you’re beginning the exit planning process, your report will be quite a bit cheaper than if another company is considering acquiring yours. 

The number of approaches required by the report could also impact costs, and that also depends on the reason for the valuation. Most appraisers use one of three possible methods. The market approach compares companies to others with a similar value to gain an overall estimate. The income approach uses the present value of the company to establish a better number. This method assumes the present value is equal to the present value of cash flow the business will always generate. The cost approach uses the value of the business based on the value of tangible assets. All three of these or just a single one of these can be used by an appraiser, but different reasons require different combinations. 

The purpose of the report isn’t the only thing that impacts the cost, though. The time and effort involved can impact it as well. Privately held companies, for example, typically have very little public data associated with them, so often more time and effort will go into the reconciliation of records to truly value the company.

Understanding what really goes into those costs can also help you understand what your total bill might be. The appraiser’s compensation will greatly affect the overall cost. While some work for a flat fee, others work on an hourly basis. If other specialists are required to create the report, that could also impact costs. For example, if a real estate appraiser must be hired to get a better look at real estate assets involved, that could increase the costs overall. 

The timeline could also impact your report. If another company is considering buying yours, the timeline could be aggressive, and that could cost more. If, on the other hand, the report is for your purposes only, you could find a far cheaper price. 

Understanding Your Costs

How much does a small business valuation cost? Well, professional business valuations can range from a few thousand dollars to tens of thousands of dollars. Knowing exactly what yours might cost just means connecting with the right professionals. At AMB, we can offer you a free business health check so you get a better understanding of what your business valuation report might cost. Give us a call today to learn more.

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