Business Valuation

What is the Value of Your Business?

Justin Lopez, AIF®
July 23rd, 2025

In the first quarter of 2025, over 2,300 small businesses were sold, with a median sale price of roughly $349,000—a 4% increase compared to the same time last year. However, the momentum that carried over from last year slowed in Q2 as sweeping tariffs announced by the Trump administration appeared to dampen overall deal activity.1

Many small business owners grappling with the impacts of elevated inflation and these newly imposed tariffs are finding it increasingly difficult to determine the value of their businesses. As a business owner, ascertaining the value of your business is important for a variety of reasons, including succession planning, estimating estate taxes, or qualifying for a loan. So, how should you go about it?

Choosing the Right Valuation Method

There are a number of valuation techniques, ranging from the simple to the very complex. Determining the most appropriate method for your business and goals will be essential to securing an accurate assessment.

Here are three common valuation methods:

  1. Asset-Based Valuation: Calculates the total value of a business’ tangible and intangible assets. Since it ignores the company’s future earning potential, it is often used for businesses that are facing bankruptcy or looking to liquidate.
  2. Earnings-Based Valuation: Evaluates the value of a business by applying a multiplier to its normalized earnings (i.e., earnings adjusted to exclude the owner’s compensation and related expenses). This multiplier can vary substantially, depending upon the industry and the outlook for the business.
  3. Market-Based Valuation: Assesses a business’ value by analyzing recent sales of similar companies, determining its perceived value based on current market demand.

The approach that is used can greatly affect the outcome and is often influenced by factors such as the type of business, the industry it operates in, and the specific objectives of the valuation. To determine the most suitable valuation method for your business, consider consulting a financial or legal professional who can help guide you through the process.

Understanding the Nuances

Business valuation is not just a formulaic exercise. For example, the value of a business as a “going concern” is significantly higher than that of a start-up. Ownership stakes also play a key role, as acquiring a minority share with limited control may result in a discount to the actual value. Additionally, the future prospects of the business can also impact its worth. Companies that are engaged in a leading-edge technology will likely command a higher premium compared to those in more mature markets.

Valuing a small business is not an exact science; it often requires balancing objective analysis with subjective judgment. Some aspects of the valuation may be debatable (e.g., the remaining life expectancy of a machine), while other aspects may be positively subjective (e.g., the value of the company’s reputation).

Getting Started

The true value of any asset is ultimately determined when a willing seller and a willing buyer agree on a price of exchange. As such, any valuation exercise may yield only a rough estimate.

Before moving forward with a valuation of your business, it is recommended to consult legal and tax professionals who are familiar with the complexities of the process. Additionally, engaging a qualified business appraiser can offer valuable insights that might be otherwise overlooked, helping to ensure you receive an accurate assessment.

If you are considering selling your business or exploring retirement and succession planning options, please do not hesitate to reach out. Our team is here to help.

1BizBuySell.com, May 2025

Disclosures: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Concord Wealth Partners, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Concord Wealth Partners. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Concord Wealth Partners is neither a law firm, nor a certified public accounting firm, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of Concord Wealth Partners’ current written disclosure Brochure discussing our advisory services and fees is available upon request or on our website. Please Note: If you are a Concord Wealth Partners client, please remember to contact Concord Wealth Partners, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing, evaluating, and/or revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Concord Wealth Partners shall continue to rely on the accuracy of information that you have provided. Please Note: If you are a Concord Wealth Partners client, please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

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