Valuation
What is the Value of Your Business? It All Depends.
Why the reason for a valuation changes the answer, how value differs from price, and which kind of valuation you actually need.
By Michael D. Rubin, CEO & Founder · Updated September 2026 · 717 words
The value of your business depends first on why you are asking: an estate plan, a divorce, a partner buyout, a bank loan and a sale each call for a different kind of valuation, and only a sale produces an actual price. Before paying for any valuation, decide which question you need answered.
The right response to an owner who asks what the company is worth is another question: what do you need the number for? That is not evasion. The purpose decides the standard of value, the method, who should prepare it and how much it will be relied on.
Common reasons owners need a value
Each of these situations asks a slightly different question of the same company:
- Planning an estate or making gifts of ownership to family members.
- Applying for a loan, or refinancing existing debt.
- Bringing in a new partner or investor.
- Setting the price formula in a buy-sell agreement between owners.
- Dividing assets in a divorce.
- Resolving a dispute between partners, or buying one out.
- Deciding whether, and when, to sell the company.
How the purpose changes the valuation
| Purpose | What is usually measured | Who typically prepares it |
|---|---|---|
| Estate or gift planning | Fair market value, often with discounts for minority or non-marketable interests | Credentialed appraiser, working with your estate attorney and CPA |
| Bank loan | What the lender could recover, often focused on hard assets and cash flow coverage | The lender, sometimes with an outside appraisal |
| Divorce or partner dispute | A standard set by the court or the governing agreement | Independent appraiser, sometimes one for each side |
| Buy-sell agreement | Whatever formula or standard the owners agreed in writing | Appraiser or the formula itself, updated periodically |
| Sale of the company | What qualified buyers will pay in today's market | M&A advisor, confirmed by competing offers |
Opposing interests pull the number apart
In some of these situations, the two sides want opposite answers. In a divorce where one spouse owns the company, the owner benefits from a low value and the other spouse from a high one. When one partner buys out another, the departing partner wants the highest figure and the remaining partner the lowest. A lender, meanwhile, cares less about the company's full value than about what it could recover if the loan went bad, which may be little more than the equipment, receivables and real estate.
That is why formal standards exist, and why courts and agreements often specify which one to use. It is also why a valuation prepared for one purpose should not be reused for another without thought. A conservative estate valuation quoted to a buyer can cost you money.
Value is an opinion; price is a fact
Most owners who ask about value really mean price: how much could I get if I sold? The distinction matters. Value is an estimate, reasoned and defensible but still an opinion, and people can disagree about it. Price is simply what a company sold for, the point where a buyer's view and a seller's view met closely enough for a closing to happen.
Price is also broader than the headline number. It includes everything that passes between buyer and seller: cash at closing, a seller note, an earnout paid on future results, payments under a non-compete or consulting agreement, liabilities the buyer takes on, and sometimes real estate or a lease. Until a company is sold, there is no price, only estimates of one.
Which do you actually need?
If a court, the tax authorities or a partner agreement is involved, you need a formal written valuation from a qualified, independent professional. If you are deciding whether to sell, you need a realistic view of what buyers are paying for companies like yours, and ultimately the test of real offers. Many owners need both at different times. Our answer on getting a formal third-party valuation before a sale explains when a formal report adds value in a sale, and our FAQ covers other common questions.
Where MDR & Associates fits
For owners considering a sale, we provide a free, confidential opinion of value, a low-to-high range, after reviewing three years of financials. For estate, gift, partnership or lending purposes, our business valuation service provides a formal written report at a separate price. For a quick first range, request a free valuation snapshot.
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Questions owners ask next
Can one valuation serve several purposes?
Sometimes, but be careful. A report prepared for estate planning may apply discounts that make sense for a gift of a minority stake but understate what a buyer would pay for the whole company. Tell the valuer every intended use at the start.
How often should a buy-sell agreement value be updated?
Many agreements call for a periodic update, and a figure left unchanged for years can badly misstate the company's worth when a partner dies or leaves. Review the formula with your attorney and refresh the value regularly, especially after major changes in earnings.