Updated August 1, 2025
For business owners, a true business valuation is key to making informed decisions about growth, investment and even exit strategies. Valuing businesses is the process of working out the economic worth of a business, so owners can get a full picture of their company’s financial situation.
In this barticle we’ll look at why a business owner would want to value their business, how to value a business and how to get a business valuation from a reputable source.
Four reasons to get a business valuation
As no two businesses are the same, the reasons why a business may want a business valuation can vary. Here are four common reasons for business valuations:
- Selling a business — One of the main reasons a business owner may want a business valuation is when they’re thinking of selling their business. Knowing the true value of the business allows the owner to set a realistic asking price, which is crucial for attracting buyers and achieving a successful sale.
- Merger or acquisition — In a merger or acquisition, understanding the value of both businesses is key to negotiating fair terms. A business valuation determines the share exchange ratio and ensures a balanced agreement.
- To get financing — Whether looking for a loan or bringing in new investors, a full business valuation provides credibility to the business’s financial health and prospects. Lenders and investors need to know their money is being invested in a profitable asset.
- Internal decision making — Business valuation is not just for external purposes but also for internal decision making. Knowing the value of the business allows owners to make strategic decisions, such as expanding operations through planning for business growth, diversifying product lines, cash flow management or improving existing business processes.
How do business valuations work? The three methods of business valuation
The valuation method used will depend on the industry, business size, purpose of the valuation and available financial data. Here are the three most common ways to value a business:
Asset-based valuation
This method calculates the value of the business based on its tangible and intangible assets. Tangible assets are equipment, property and inventory, intangible assets are intellectual property, goodwill and brand value. The total value of these assets minus liabilities equals the net asset value.*
Market-based valuation
This method compares the business to similar businesses in the market that have been sold or are publicly traded. This method uses market multiples, such as the price-to-earnings (P/E) ratio, to estimate the value of the business.
Income-based valuation
This approach looks at the business’s earning potential. The two methods within this category are the capitalisation of earnings method, which divides the expected earnings by the capitalisation rate and the discounted cash flow (DCF) method, which calculates the present value of future cash flows.
How much does a business valuation cost?
There’s no simple answer to this as the cost of a business valuation can vary greatly depending on many factors. Also, there’s no fixed price for a valuation. Business valuations are a customised service tailored to a business’s individual needs.
For more information on how to value a business see our business valuation calculator.
So, who does business valuations? While there are many options, if you want unmatched industry expertise why not work with the professionals at CFO On Call?
CFO On Call — Your go-to consultants for business valuations
CFO On Call is a financial consulting firm specialising in assisting businesses with various financial needs, including business valuation services and exit strategy planning. Our team of Virtual CFOs and valuation analysts have years of experience assessing businesses across many industries.
Business valuation is a complex process that requires careful planning. Let us simplify the process. Talk to the experts at CFO On Call today to get started.
