Business valuation: prepare the evidence first

Business valuation estimates value under a stated method, purpose and assumptions. An asking price is a seller’s proposal, while the final transaction price also reflects negotiation, financing and specific terms. Before discussing a multiple, identify what is being valued: shares, selected assets or an operating business with particular obligations. Different transaction boundaries can produce different results. This guide prepares the evidence conversation; it does not assign a value to your company or recommend an investment.

Collect financial statements, tax records where appropriate, detailed sales and cost information, and a schedule of liabilities. Explain unusual items with evidence rather than automatically adding them back to earnings. A cost that will recur under a new owner is not made irrelevant by calling it discretionary. Reconcile period totals and preserve the basis of the figures. An adviser can assess adjustments more reliably when they understand what the business actually required to operate.

Describe customer concentration, supplier concentration, owner involvement and contracts that require consent or renewal. Show how much operating cash and inventory the business normally needs. A hypothetical firm with strong reported earnings might still require substantial seasonal working capital or replacement equipment. The buyer’s cash commitment therefore extends beyond the headline purchase price. Separate transferable business capability from relationships or knowledge that depend entirely on the current owner.

Ask which valuation methods suit the purpose, which comparable evidence is available and how uncertainty is reflected. Test the effect of losing a major customer or replacing the owner’s operational work. Document the information date and unresolved issues. Coordinate legal, tax and financing advice for an actual transaction. SBA’s public acquisition planning resources provide general context; this evidence framework is Motenza’s own and does not constitute an independent appraisal or an assurance that a proposed purchase price is fair.

Prepare an index showing the financial periods provided, relevant contracts, asset records, obligations and assumptions. Mark missing records instead of substituting an optimistic estimate. Give unusual adjustments a written explanation and supporting evidence so the adviser can assess them. Distinguish the current operation from a proposed future improvement that a buyer would have to deliver. Keep transaction costs and working-capital needs visible alongside any valuation discussion. The purpose of the index is to make the analysis traceable, not to influence an adviser toward a preferred result.