Business Valuation Basics for Oregon Owners
What is your business worth? The honest answer is that it depends on why you are asking. This guide explains why Oregon business owners get valuations, three approaches appraisers use, and the pathways from a quick online estimate to a full independent appraisal, so you can match the right kind of business valuation to the decision in front of you.
This page is educational. T. Mann Financial does not prepare business valuations or appraisals.
The reason behind the valuation shapes everything that follows.
Income, market, and asset: how appraisers look at value.
From quick estimates to full appraisals, and when each fits.
Why Value Your Business?
For many owners, the business is a major share of their net worth, yet it is often the asset they can least describe in dollars. A business valuation puts a defensible number on that asset, and the reason you need it decides which kind of valuation makes sense. A rough number can be enough to start retirement planning. A gift to your children, a partner buyout, or an SBA-financed sale usually calls for much more.
Six common reasons to get a business valuation
1. Strategic Planning
Understanding a rough estimate of business value supports goal setting and identifying areas to focus on.
4. Buying Considerations
Buyers can use an estimate to begin their own analysis before commissioning due diligence.
2. Succession Planning
For owners thinking about retirement or family transition, an estimate helps frame the conversation early.
5. Insurance Planning
An estimate helps frame conversations about appropriate coverage levels with your insurance professional.
3. Selling Considerations
Owners considering a future sale can use an estimate as a starting point before engaging a transaction advisor.
6. Attracting Investors
An estimate is a starting point. Most investors will require a third-party valuation before committing capital.
Some situations that require a certified or qualified appraisal.
A business valuation estimate is not a certified appraisal and should not be used in certain situations. T. Mann Financial may refer you to a qualified business appraiser when one is needed.
Some situations set a formal bar. Federal tax rules generally require a qualified appraisal by a qualified appraiser for larger noncash charitable gifts, including privately held stock. An employee stock ownership plan must have its non-traded employer stock valued by an independent appraiser. Estate and gift tax returns report business interests at fair market value. SBA 7(a) lenders financing the purchase of a business obtain their own business valuation, generally from an independent qualified source. Appraisers who substantially misstate value on a tax return can face IRS penalties under Section 6695A, which is one reason credentialed appraisers follow formal standards.
Divorce, shareholder disputes, and other litigation follow court rules and Oregon law. Your attorney can tell you what the court will expect.
The Three Approaches to Business Value
Appraisers often look at a business from three angles. The income approach asks what the business will earn. The market approach asks what similar businesses have sold for. The asset approach asks what the business owns and owes. IRS valuation guidelines direct appraisers to consider all three, and most reports weigh them against each other before reaching a final number.
What appraisers often look at
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The nature and history of the business
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The economic and industry outlook
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Book value and financial condition
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Earning capacity
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Dividend-paying capacity
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Goodwill and other intangible value
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Prior sales of the company’s stock and the size of the block being valued
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Market prices of comparable publicly traded companies
Standards of Value: Same Business, Different Numbers
Two credentialed appraisers can reach different numbers for the same company and both be right, because they are answering different questions.
Fair market value, the standard for federal estate and gift tax, assumes a hypothetical willing buyer and willing seller, neither under pressure and both reasonably informed. Investment value is what one particular buyer might pay given their own plans. Fair value is defined by state law or accounting rules. Knowing which standard applies keeps expectations realistic before you sit down with a buyer, a partner, or the IRS.
Valuation Pathways: From Quick Estimate to Full Appraisal
Not every question needs a full appraisal. Online estimators and industry rules of thumb are fast and inexpensive, and they can help you decide whether a deeper look is worth it. A business broker’s opinion of value reflects what the market might pay for a listing. A calculation engagement uses a credentialed analyst and agreed-upon procedures. A full valuation engagement ends in a formal conclusion of value and is the pathway most tax, legal, and lending situations expect. Each step adds time and cost, and each adds depth and defensibility.