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Business valuation cost: how much does a business valuation for a small business cost?
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3 Answers
The cost - like in anything else - will vary depending on different factors that may include the scope of the business, the condition of the 'books' and the purpose for the valuation. I have performed valuations mainly to be used in litigation scenarios, but generally speaking the size of the business (in this context "size" being measured in revenues) does not correlate to cost. For example a small (revenue) business may require virtually close to the same amount of time as does a business that has considerably more revenues by comparison. Again, the scope of the business and the quality of the financial statements provided can have more bearing on cost than revenue size. It is not uncommon for valuations to run upwards of $7,500.00.
Teresa is spot on that size does not correlate to cost, especially if a small business is particularly complex.
I would also add it depends on the role you expect the company performing the valuation to perform. Are they simply handing you a number? Are you buying and want them to look for skeletons in the closet? Are you selling and you would like them to assist you in finding a buyer?
You are not going to get anything of value for a few hundred dollars. Use Teresa's ballpark of $7,500 as a starting point, and remember that this is a pittance compared to something that represents your livelihood (past or future).
Scott, agree with Teresa and Nicole.
Just curious, what is the valuation for? Is it to get a gauge or rough idea of the valuation of your business?
If so, assuming your business is beyond the start-up phase and is generating reliable cash flows, then strategic buyers on average will pay you 3 to 7 times your adjusted EBITDA (earnings before interest, taxes, depreciation/amortization). No, not perfect, but somewhere in the ball park for the valuation of your biz.
I share this as this could save you $5k to $8k on a valuation. Keep in mind a formal valuation does not take into consideration what 3 to 10 potential buyers will offer when they know others are competing on the purchase of your business. The more buyers competing for your biz, the higher the price/valuation of your business. So a formal valuation will never capture this dynamic.
If the valuation is needed for one of several tax reasons or personal requirements, then hiring a valuation expert is understandable. Most CPA's have relationships with valuation experts. Talk to a couple in your city and obtain some names where you can start getting a feel for the cost in your region.
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