How to Get a Real Valuation for Your Business 

Why a business valuation calculator is just the beginning 

You can’t grow the valuation of your business if you don’t know how your business is valued today.  

There are a wealth of tools promising to return your valuation based on your responses to a few questions and your consent to receive marketing emails.  

But these online calculators don’t tell the whole story! They reflect an approximation of what your business might be worth today, under average conditions, to an average buyer. The truth is that almost nothing about mergers and acquisitions is average, and understanding your valuation will require more effort and nuance than any one tool can provide.  

As our Elevate Your Valuation report makes clear, there’s a lot you can do to improve on the estimate you get from a calculator. We’ll talk about the steps you can take to increase your valuation, but first we need to understand what these tools are—along with their limitations. 

What valuation calculators can and can’t tell you 

Business valuation calculators take a handful of inputs like your company’s revenue, income, industry, and geographical footprint to produce an estimate of fair market value, or the price that an informed buyer and seller would agree on.  

I don’t recommend checking your free valuation too often, because this might start feeling like a form of validation. However, seeing an occasional calculator result might be useful as a gut-check. For example, it give you a sense of whether your business’s value is approaching a target you have in mind before contemplating a sale.  

That’s where calculators come in handy. But here’s why they only supply a starting point when it comes to selling your business: 

• Calculators don’t account for competitive bidding dynamics. An average or median valuation doesn’t represent the whole field of bidders in an auction process that a good investment bank will run on your behalf. In a sense, there isn’t such a thing as an accurate valuation—just what a range of buyers are willing to pay, which can vary greatly. Competitive auctions are one reason that 89% of Class VI’s deals since 2012 saw higher valuations than their estimates from BizEquity, a prominent valuation tool. 

• Individual buyers may have good reason to pay a premium. Strategic buyers—companies in your industry or supply chain—may see your business as a good investment because they can acquire your market share and take a competitor out of the running with one move. Basic valuation tools can’t and won’t account for this. 

• You can take intentional steps to prepare the business in advance of a sale. There are important preparatory steps you can take to increase your value before a transaction. These steps revolve around the Value Creation Formula: putting a capable team in place, telling a credible and data-backed growth story, improving operational efficiency, and strengthening financials. 

The key is not to simply accept a calculator’s estimate but actively work to exceed it. 

Placing the estimate in context 

Sometimes clients come to us with a calculator result and want to understand what it means for their future. Our answer is usually, “It’s a starting place, and you have work to do!” 

The truth is that there’s always work to do, and an estimate typically doesn’t take into account your particular circumstances. One way to situate your business in context is using our free Compass diagnostic tool, which gives a solid idea of how your company rates on the Value Creation Formula. You can take this information away to put a plan in place for improving performance, which could include advance preparation before hitting the market. 

To be clear, Class VI deals that just took advantage of our experienced deal teams, but not the advisory prep work of our Pathfinder program, still did well: they received a median 71% premium above their BizEquity estimates. But Pathfinder-prepared clients did even better, with a median 109% premium over BizEquity.  

A calculator simply can’t account for the powerful Value Creation Formula work these clients undertook to increase their chances of a larger valuation (often to the tune of millions of extra dollars). The gap between a calculator’s output and a final sale price isn’t random—it’s largely a function of how well an owner prepares. 

Work the Formula to find success 

We’ve found the four components of the Value Creation Formula to be the best indicators of company health and worth. That’s why we assigned a score of 1 to 10 for each factor—team, growth story, operations, and financials—to every client we analyzed for the Elevate Your Valuation report.  

Overall, businesses with Value Creation Formula scores of 35+ (out of 40) had a median premium of 168% above BizEquity valuations. Two-thirds of clients in this category had Pathfinder preparation, suggesting that intentional prep helped them achieve these Formula scores.  

This data might be enough to shift your thinking from, “My business is worth what the calculator says” to “My business can be worth what I make it worth before doing a deal.” Whether you prepare on your own or with help is up to you. 

How an M&A advisor works for you 

The difference between a calculator valuation and a top-tier transaction outcome rarely happens by accident. Instead, it takes deliberate preparation and possibly the right guidance to help you execute. 

Working with an advisor starts with an honest assessment of where your business stands. From there, they can help build a prioritized roadmap to close the gaps that matter most to buyers. Ideally, that work will begin at least 1–3 years before going to market because changes take time to implement, and buyers want to see those improvements reflected in your financials and operating metrics before they’ll pay a premium for them. 

The best advisor relationships function as value-creation partnerships that begin with a diagnostic phase, continue with thorough preparation, and culminate in a transaction process where you enter the market as a prepared, confident seller. By the time the competitive bidding is done and a letter of intent arrives, much of the important work should already be done. 

Calculate, then go to work 

There isn’t only one way to get to the most accurate valuation for your business, but a calculator can at least get you started as long as you’re aware of its limitations.  

Getting a valuation estimate is just the first step. If you’re a few years out from a transaction, right now is your window to act to improve your chances of getting the deal you deserve. 

So, calculate as comprehensively as you can, set the valuation you want to get to by the time you sell, and prioritize the actions that are the most likely to get you there.