Valuation
Business Valuation Checklist: What Raises and Lowers Your Company's Value
A practical checklist of what lifts and what lowers a private company's value, so you can see your business the way a buyer will.
By Michael D. Rubin, CEO & Founder · Updated September 2026 · 858 words
A valuation checklist starts with the business itself, the things that make buyers pay more or less, then turns to the financial analysis, the deal terms and an independent second look. Working through it before a sale shows you what a buyer will praise and what they will use to argue the price down.
Use it as a self-assessment. Mark each item honestly; the weak ones become your to-do list, and the strong ones become the evidence your advisor puts in front of buyers. Most owners find a few surprises on both sides: strengths they had taken for granted and risks they had stopped noticing.
1. The business: drivers and detractors
Buyers read the business before they read the numbers. The more of the left-hand column you can show with evidence, the stronger your position, and each item in the right-hand column is something a buyer will ask about. Be as critical as a buyer would be, and for each row note one piece of evidence you could hand a buyer tomorrow.
| What raises value | What lowers value |
|---|---|
| Size and steady growth | Heavy reliance on one or two customers |
| A management team that runs the business without the owner | Owner holds every key relationship and decision |
| A defensible niche, location or exclusive product line | A price-sensitive product that is easy to substitute |
| High, sustainable cash flow | Poor or unreconciled financial records |
| Healthy working capital | A heavy debt load |
| Good market share in a growing industry | A shrinking market, foreign competition or rising regulation |
| Modern, well-kept facilities and equipment | Aging machinery that will soon need replacing |
| Written agreements with key staff, customers and suppliers | Handshake deals and no employment agreements |
| Assets such as land or equipment worth more than their book value | A history of litigation or problems with employees, customers or suppliers |
2. The financial analysis
Once the business is understood, value is calculated. Two approaches dominate in the lower middle market. The market approach looks at what comparable companies have sold for, usually expressed as a multiple of earnings. The earnings approach applies a multiple based on the return a buyer requires for the risk involved. Most valuations use both and reconcile them. When the two disagree sharply, find out why before relying on either.
Both start with recast earnings, so accurate add-backs matter. Our article on how add-backs affect value explains which ones buyers accept. In MDR & Associates' experience, companies with $3 million to $100 million in revenue most often sell for three to seven times adjusted EBITDA (earnings before interest, taxes, depreciation and amortization); where yours falls depends largely on the table above. A multiple applies to earnings the buyer believes will continue, so one unusually strong year is usually averaged with the others rather than taken on its own.
3. Structure and terms
Price and terms are linked. An owner who demands all cash at closing narrows the pool to buyers who can pay that way, and may accept a lower price as a result. An owner willing to carry a modest seller note or accept part of the price later can often achieve a higher total. When you compare values, compare the terms that come with them. Ask your advisor to express each offer as cash at closing plus deferred amounts, so you compare like with like.
Also check what is included. Working capital, real estate, vehicles and inventory can each move the effective price, and two offers with the same headline can include very different assets. Terms can also include your own role after closing, which some buyers value and will pay for.
4. A second opinion and the outlook
Even experienced professionals test their conclusions with someone else. Before relying on any valuation, ask a second qualified person to review the key assumptions, especially the add-backs, the multiple and the outlook. A valuation that has been challenged and still holds is far more persuasive to a buyer. Four outlook questions deserve a direct answer:
- Is your industry's outlook improving or worsening?
- Are there distressed circumstances that could force a quick sale?
- Are there regulatory, tax or material-cost changes on the horizon?
- Would a buyer need to spend heavily on equipment soon after closing?
Turning the checklist into a plan
If the review finds gaps, most can be narrowed over a year or two. Pre-exit consulting turns the weak items into a schedule, and a formal business valuation is available when you need a documented report for partners, lenders or tax planning. Our guide What is my business worth? covers how buyers put all of this together. Start with the items that affect earnings buyers can verify, because those move the multiple and the earnings at the same time. Repeat the checklist once a year so you can see whether the changes are reaching the numbers.
How MDR & Associates uses the checklist
Our free, confidential opinion of value works through these same items using three years of your financials, and it comes with the reasoning, not just a number. It also tells you which items would move your price most if you improved them. Start with the free valuation snapshot.
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Questions owners ask next
Which item on the checklist matters most?
For most lower middle market companies, sustainable cash flow comes first, followed closely by how much the business depends on the owner and on a few customers. A company with strong, verifiable earnings that runs without its founder attracts more buyers, and more buyers usually means a better price.
How often should I review my company against this checklist?
Once a year is a good habit, ideally when your annual financial statements are finished. It shows whether the changes you made are reaching the numbers buyers study, and it means you are never starting from scratch if an unexpected offer arrives or life forces a sale.