How To Value Your Business: Lessons From A Professional Business Valuator

Introduction

Valuing a business is one of the most critical—and misunderstood—steps in buying, selling, or planning for the future of a company. Whether you’re preparing for an exit, negotiating a purchase, or navigating a major life event like a partnership dispute or divorce, understanding what a business is truly worth can make or break the outcome.

In this episode of There’s a Solution for That, host Brad sits down with Ryan Hutchins of Peak Business Valuation. As both a seasoned valuation expert and a multi-business owner himself, Ryan brings a rare blend of technical expertise and real-world perspective to the conversation.

Why Business Valuations Matter More Than You Think

Most people associate business valuations with buying or selling a company—but those are only part of the picture. Ryan explains that valuations are also commonly required for:

Divorce proceedings
Partnership disputes and buyouts
Gift and estate tax planning
SBA and bank financing
Purchase price allocations after acquisitions

In many of these scenarios, a professional valuation isn’t optional—it’s required by lenders, courts, or the IRS.

Certified vs. Informal Valuations

Not all valuations are created equal. Online tools and broker estimates may offer quick answers, but they often lack depth, accountability, and objectivity.

Professional valuation firms:

Spend 15–40 hours per engagement
Use multiple valuation methodologies
Are legally accountable for their conclusions

In contrast, informal or software-driven valuations rely heavily on user input and are often tied to sales incentives, such as broker commissions.

Buyer vs. Seller: Who Orders the Valuation?

Ryan breaks down how valuations differ depending on who’s involved:

For Buyers

Banks—especially SBA lenders—typically order valuations to confirm the business supports the loan amount. However, buyers who wait until late in the process risk discovering the business doesn’t appraise at the agreed price.

Getting a valuation early can:

Prevent wasted underwriting time
Strengthen negotiation leverage
Reveal deal-breaking red flags sooner

For Sellers

Sellers often seek valuations to validate expectations. Many discover that broker-listed prices exceed fair market value, which explains why deals stall or fall apart.

An objective valuation helps sellers understand what their business is realistically worth—and why.

The Three Core Valuation Approaches

Professional valuations typically rely on three primary methods:

1. Asset Approach

Used when a business’s value is tied primarily to its physical assets—common in industries like laundromats or equipment-heavy operations.

2. Market Approach

Compares the business to similar companies that have sold recently. While familiar, this method can be misleading if data is limited or poorly matched.

3. Income Approach

Often the most insightful method, this approach focuses on cash flow and risk. It accounts for factors like:

Customer concentration
Management depth
Industry stability
Growth or decline trends

According to Ryan, this method best captures the real story behind the numbers.

The Story Behind the Financials

Financial statements alone don’t tell the full story. Valuators dig deeper to understand:

Why revenues or expenses changed
Whether costs are personal or business-related
How the company compares to industry peers

Industry benchmarking tools allow valuators to compare a company’s performance against similar businesses, providing essential context for buyers and sellers alike.

Taxes, Add-Backs, and Exit Planning

Many owners minimize taxable income for years—only to realize later that low reported profits reduce valuation.

Ryan emphasizes:

Clean, well-documented financials are critical
Excessive add-backs raise red flags
Paying more taxes in the short term can significantly increase exit value

Preparation matters. Opportunities to sell can arise unexpectedly, and owners who are ready benefit most.

Cost, Timing, and What to Expect

Typical valuation engagements:

Cost between $2,600 and $16,000+
Take 2–4 weeks to complete
Depend on business size, complexity, and industry

Compared to the financial and emotional cost of a failed deal, a professional valuation is often a small but powerful investment.

Final Advice: Objectivity Wins

Ryan’s top recommendation for both buyers and sellers is simple: work with independent, unaffiliated professionals.

Objective experts remove emotion from the process, replace assumptions with data, and help ensure decisions are based on reality—not hope or pressure.

Conclusion

Business valuation isn’t just about numbers—it’s about clarity, preparation, and informed decision-making. Whether you’re years away from an exit or actively negotiating a deal, understanding your business’s true value gives you leverage, confidence, and control.

As this conversation makes clear, being prepared isn’t just smart—it’s profitable.