How to Write Business Valuation Reports

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Valuations establish a company's fair market value.
Valuations establish a company's fair market value. (Image: Thomas Northcut/Photodisc/Getty Images)

Business valuation reports are necessary when a company is for sale or sought unexpectedly by a potential buyer. A business valuation is similar to a real estate appraisal. Both determine the fair market value of a property or asset. Business valuations are usually based on industry standards called "multiples." Many business valuations are set by multiplying a certain number by an industry-accepted metric -- hence the term multiples. For example, Entrepreneur.com reports that landscaping companies are often valued at 1.5 times revenue, minus certain expenses plus the worth of the equipment.

Review business valuation methods for companies you will list in the report. Standards are often different depending on the industry. Forbes.com reported in 2009 that beauty salons are often valued at about three times pre-tax income, for example. Internet companies are valued at up to 25 times revenue as of 2011, according to The Wall Street Journal.

Determine industry-specific valuation methods by contacting business brokers to ask about recent sales and standards. Get referrals for brokers from consultants at Small Business Development Center Networks. The centers are partially financed by the U.S. Small Business Administration, and there are more than 1,000 offices around the country (see Resources).

Obtain financial information needed to compute valuations for companies you are reporting on. Get the financial information by checking public records for publicly traded companies. Visit the Securities and Exchange Commission website to review financial records filed by publicly traded companies. Obtain financial information from privately held companies by entering into nondisclosure agreements with the companies, allowing an exchange of information based on a possible acquisition.

Write the business valuation report. List current valuation methods for specific industries based on your research. Also list valuations for the companies.

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