How to Structure a Valuation Report

Brandon Chicotsky
Nov 12, 2025
16 min read

Updated: Jan 6

A well-structured valuation report is essential for determining a business's worth and ensuring it is understood by all stakeholders. Whether you're preparing for a sale, legal proceedings, or financial planning, the report's organization can make or break its credibility. Here's what you need to know:

Start with an Executive Summary: Highlight the final valuation, purpose, and methods used. For example: "Final Business Value: $2,400,000 as of December 31, 2025, for a potential sale."
Explain Valuation Methods: Use approaches like the income, market, or asset-based methods. Clearly outline why specific methods were chosen.
Provide Financial Context: Include key metrics like EBITDA, revenue growth, and profit margins. Adjust financials for one-time expenses or owner-related costs to reflect true profitability.
Include Business and Market Insights: Detail the company's history, operations, and industry trends to connect numbers to real-world conditions.
Document Assumptions and Adjustments: Specify factors like discount rates, growth projections, or marketability discounts to justify valuation results.
Add Supporting Materials: Attach financial statements, normalization adjustments, and data sources to back up your analysis.

A clear structure builds trust and ensures your valuation stands up to scrutiny from buyers, sellers, or regulators. Accuracy and transparency are key - every assumption and calculation should be traceable and defensible.

Executive Summary and Final Value

The Executive Summary and Final Value section is the centerpiece of your valuation report. It’s the first stop for busy executives, potential buyers, and decision-makers who need a clear snapshot of what your business is worth. This section boils down the valuation analysis into its most critical details.

Here, you’ll need to deliver three essential pieces of information: the final business value, the methods used to determine it, and the key financial data that supports your conclusions. Nail this section, and you set the stage for the rest of the report.

Stating the Final Business Value

The final business value should be front and center. Display it prominently in U.S. dollars, like $2,400,000. Don’t bury this number in paragraphs - make it bold and easy to spot.

A complete valuation conclusion includes three key details: the final value, the valuation date, and the purpose. For example: "Final Business Value: $2,400,000 as of December 31, 2025, for the purpose of a potential sale to a third party."

The valuation date is crucial because it ties the analysis to specific market conditions and trends. The purpose, on the other hand, shapes the entire approach. For instance, a valuation for estate planning will focus on different priorities than one prepared for a potential acquisition. Being clear about the purpose helps readers understand the assumptions and context behind the numbers.

Overview of Valuation Methods Used

Once you’ve stated the final value, briefly explain the methods that led to this conclusion. Professional valuations often rely on multiple approaches to ensure accuracy and credibility. The three main methods are the income approach (e.g., discounted cash flow), the market approach (e.g., comparable company analysis), and the asset-based approach.

Your summary should outline which methods were used and how they factored into the final number. For instance: "The final value reflects a weighted average of the income approach (60%) and market approach (40%). The asset-based approach was considered but given minimal weight due to the company’s strong earnings potential."

Transparency here is key. Readers need to understand your reasoning without getting bogged down in technical jargon. If one method produced results that significantly differed from the others, acknowledge it and explain why certain approaches carried more weight.

The weighting decisions should align with the nature of the business. For example, a tech company with valuable intellectual property might lean heavily on the income approach, while a manufacturing business with significant physical assets might prioritize the asset-based method.

Key Financial Numbers

The executive summary should also spotlight the financial metrics that drive the valuation. These typically include EBITDA, revenue growth rates, profit margins, and relevant financial ratios.

Present these numbers in a clean, easy-to-read format using standard U.S. conventions. For example, show EBITDA as $480,000 instead of $480K, and express margins as percentages like 16% rather than 0.16.

Key Financial Metric	Value	Context
2024 Revenue	$2,400,000	8% annual growth
2024 EBITDA	$480,000	20% margin
Industry EBITDA Multiple	5.0x	Based on comparable companies
Total Assets	$1,750,000	As of valuation date

These figures tell the story behind your valuation. For example, strong EBITDA margins indicate efficient operations, while steady revenue growth signals market demand and effective management. Industry multiples provide a benchmark for how similar businesses are typically valued.

For businesses working with specialized brokers like God Bless Retirement, this financial summary is especially critical during confidential marketing processes. Potential buyers often rely on these key metrics to make initial decisions before diving into the full financials.

Precision is non-negotiable in this section. Rounded estimates or vague approximations can hurt credibility and cost money during negotiations. Every figure should be defensible and traceable to your analysis. These financial metrics lay the groundwork for the detailed evaluation presented in the next section.

Business and Industry Background

This section connects financial data to the company’s day-to-day operations, helping to ground the numbers in reality. A manufacturing firm with unique technology will have entirely different value drivers than a service-based business that relies heavily on key personnel. Likewise, companies in expanding industries face distinct opportunities and risks compared to those in declining markets. Understanding these dynamics is essential for evaluating both the hard numbers and the softer, qualitative aspects that influence business value.

About the Company

To paint a clear picture of the business, start with the basics: when it was founded, its legal structure, location, and ownership. For instance, a family-owned HVAC business established in 1998 as an LLC tells a very different story than a tech startup incorporated just a few years ago. These foundational details complement the financial data outlined in the Executive Summary.

Ownership structure is particularly important because it directly impacts the company’s marketability and valuation. A single-owner business faces different risks compared to one with multiple family members involved. Be sure to document any recent ownership changes, buy-sell agreements, or planned transitions, as these elements can influence both the valuation approach and potential buyer interest.

Summarize the company’s core operations in one sentence: What does it do, who are its customers, and where does revenue come from? Next, highlight the management team. Who are the key players, and what roles do they fill? For example, a company where the owner manages 80% of customer relationships carries a higher risk than one with a well-rounded, experienced management team.

Details about facilities, equipment, technology, and staffing also help illustrate the business model’s scalability. A 10,000-square-foot facility with state-of-the-art equipment presents a very different image to potential investors than a home-based operation.

Industry Facts and Market Trends

Providing industry context helps translate a company’s performance into broader market insights. Include the industry’s size (in U.S. dollars) and its projected growth rate. For example, the U.S. HVAC industry is valued at around $120 billion with an annual growth rate of 3%, offering a stable backdrop for valuation. By contrast, tech sectors often present faster growth but come with different challenges and opportunities.

The regulatory environment is another critical factor. Industries like healthcare are heavily regulated, which can increase costs and create barriers to entry. Similarly, construction companies must navigate strict building codes and safety regulations. Note any recent or upcoming regulatory changes that could impact the business’s future.

The market structure and competitive landscape also provide valuable context. Is the market fragmented, with many small players, or consolidated around a few dominant competitors? Fragmented markets can present acquisition opportunities, while consolidated markets may pose competitive challenges.

Technology trends and shifts in consumer behavior are reshaping industries across the board. For example, the growing demand for telemedicine in healthcare or the push for energy-efficient systems in HVAC creates both opportunities and potential obstacles. Businesses that adapt to these changes are often better positioned for long-term success.

Finally, consider how the industry performs during economic cycles. Consumer discretionary businesses, for instance, tend to feel the impact of economic downturns more acutely than essential service providers. Understanding these dynamics can shed light on how current conditions might affect future performance.

Other Factors That Affect Value

Beyond the numbers, qualitative factors can significantly influence a business’s value. Customer concentration is one such factor. For instance, a company where one customer accounts for 60% of revenue carries a much higher risk than one with a diverse customer base.

Intellectual property can also play a major role, particularly for tech and manufacturing companies. Patents, trademarks, trade secrets, or proprietary processes can create competitive barriers that justify higher valuations. Be sure to document any intellectual property assets that provide a sustainable advantage.

Supplier relationships and supply chain stability are equally important. Companies with a diversified supplier base and strong vendor partnerships typically achieve higher valuations. Long-term contracts or exclusive agreements with suppliers can further enhance value.

Brand reputation and market position are other key drivers. A business with a strong brand, industry awards, or recognized certifications can command premium pricing and achieve more stable cash flows.

Management depth is another critical consideration. A business that can run effectively without constant owner involvement is generally more attractive to buyers. Companies with well-documented processes, trained staff, and clear succession plans are often valued more highly.

Geographic factors also come into play. Businesses located in growing metropolitan areas often have more promising long-term prospects compared to those in shrinking rural markets. Factors like lease terms, location advantages, and local demographics all contribute to overall value.

For companies working with specialized brokers, these qualitative factors take on even greater importance. God Bless Retirement’s team of professionals - including CPAs, private equity experts, and other specialists - play a key role in identifying and showcasing these value drivers to potential buyers. Their commitment to confidentiality ensures that competitive advantages are protected while maximizing the business’s value.

Financial Review and Adjustments

Evaluating a business’s financial health is a crucial step in understanding its earning potential. This involves analyzing historical financial performance, making necessary adjustments to normalize earnings, and comparing results against industry benchmarks. A thorough review ensures the valuation reflects the business's actual profitability.

Past Financial Performance

A detailed financial review typically covers five years of financial records to identify trends and patterns[2][3]. This includes examining income statements, balance sheets, and cash flow statements in both their original and normalized forms[5]. By looking at multiple years, businesses can uncover seasonal fluctuations, growth trends, or anomalies that may need further investigation. For instance, if a business sees a significant revenue drop in a specific year due to an external factor, it’s essential to determine whether this was a temporary issue or signals a long-term challenge. Including trailing twelve-month data offers additional insight into the business’s most recent performance[5]. These historical evaluations are the foundation for making EBITDA adjustments.

Adjusting EBITDA Numbers

After reviewing historical data, adjustments are made to EBITDA to eliminate distortions caused by irregularities[2][5]. Common normalization adjustments include:

One-time expenses: Nonrecurring costs, such as major repairs or isolated legal fees, are excluded to reflect ongoing operations.
Owner personal expenses: Small businesses often include owner-related costs like above-market compensation, personal vehicle expenses, or other non-business expenditures. For example, if an owner’s salary significantly exceeds market rates, the excess is added back to earnings.
Non-operating income: Revenue from nonessential activities, like investment income or gains from asset sales, is removed to focus on core business operations.

These adjustments help calculate the seller’s discretionary cash flow (SDCF), which represents the cash available to a new owner after accounting for necessary operating expenses. This metric is particularly valuable for businesses with EBITDA under $25 million, where owner-related expenses can disproportionately inflate reported costs.

Financial Ratios and Industry Comparisons

Key financial ratios play an essential role in validating adjusted earnings and refining the valuation process. Normalized financial statements allow for benchmarking the business against industry standards[5]. For example:

Liquidity ratios (e.g., current ratio) measure the company’s ability to handle short-term obligations. A current ratio of 2.0 indicates that the business has $2.00 in current assets for every $1.00 in liabilities, showing solid liquidity.
Leverage ratios (e.g., debt-to-tangible net worth) provide insight into the company’s debt levels and financial risk.
Operational efficiency ratios (e.g., inventory turnover) assess how effectively the business utilizes its resources.

Here’s a quick breakdown of key ratio categories:

Ratio Category	Key Metrics	Purpose
Liquidity	Current ratio, quick ratio	Evaluate short-term financial stability
Leverage	Debt-to-equity, debt service coverage	Assess financial risk and borrowing capacity
Efficiency	Inventory turnover, asset turnover	Measure operational performance
Profitability	Gross margin, operating margin, net margin	Compare earning power to industry peers

This detailed financial review serves as the backbone of the valuation process. At God Bless Retirement, this comprehensive analysis ensures potential buyers gain a clear picture of the business’s true cash flow and profitability.

Valuation Methods and Calculations

Once the financial review is complete, the next step is to translate those normalized financial figures into a clear business valuation. This involves applying specific valuation methods and documenting the assumptions behind them. Here's a closer look at the key approaches and the reasoning behind their use.

Types of Valuation Methods

Professional valuations generally rely on three main approaches. Each method suits different types of businesses and scenarios:

Income Approach: This method estimates a business's value by calculating the present value of its expected future cash flows. Techniques like Discounted Cash Flow (DCF) or Capitalization of Earnings fall under this category [3][5]. It’s a great fit for businesses with steady, predictable earnings.
Market Approach: This method compares the business to similar companies that have been sold or are publicly traded, using valuation multiples like price-to-earnings or price-to-revenue ratios [3][5][6]. It works best when reliable market data is available. However, for businesses with less than $25 million in EBITA, finding relevant data can be tricky, making access to proprietary transaction databases particularly useful.
Asset-Based Approach: This approach focuses on the net asset value of the business, adjusting assets and liabilities to their fair market value [3][5]. It’s commonly used for asset-heavy companies, businesses with significant real estate holdings, or situations where liquidation is a factor.

Valuation Method	Best Use Case	Key Data Requirements
Income Approach	Businesses with steady earnings	Cash flow forecasts, discount rate
Market Approach	When comparable market data is available	Transaction multiples, comparables
Asset-Based Approach	Asset-intensive or unprofitable businesses	Asset appraisals, balance sheet data

Most professional valuations combine multiple methods to cross-check results and provide a well-rounded estimate. The choice of method depends on factors like the industry, financial history, business size, and the purpose of the valuation [2][3][5].

Main Assumptions and Data Used

Valuation relies heavily on key assumptions, which must be clearly documented. Two of the most critical are the discount rate and growth projections.

Discount Rate: This reflects the cost of capital and the risk profile of the business. For small to mid-sized U.S. companies, it typically ranges from 15% to 30% [5]. A higher rate indicates higher perceived risk.
Growth Projections: These are vital for the income approach and should be grounded in the company’s historical performance, industry trends, and realistic expectations. Conservative estimates tend to hold up better under scrutiny than overly optimistic ones.

For the market approach, the selection of comparable companies plays a crucial role. Analysts must explain why specific transactions were included or excluded, considering factors like business size, industry, location, and timing.

The data needed for these methods includes historical and projected financial statements, industry benchmarks, transaction data for similar businesses, and broader economic indicators [3][5][6]. For example, using the income approach for a company with $500,000 in projected annual cash flows and a 12% discount rate involves calculating the present value of each year’s cash flow and the terminal value [5][6].

At God Bless Retirement, proprietary transaction data for businesses with less than $25 million EBITA strengthens the accuracy of market-based comparisons [6].

Value Adjustments and Reasons

Initial valuations often require adjustments to reflect specific business characteristics or ownership structures. For instance:

Marketability Discount: Privately held businesses often face reduced liquidity compared to public companies, so a discount of 10%-30% may be applied [5].
Control Premiums: If the valuation reflects a controlling interest, a premium of 10%-40% might be added. This accounts for the added value of decision-making authority, dividend control, and strategic direction [5].

Other adjustments may include accounting for key person dependency or adding premiums for strategic assets or advantages. Each adjustment must be backed by clear reasoning and market evidence.

"Our NACVA-certified valuations and appraisals are accepted by buyers, sellers, banks, courts, and the IRS. We do not use ballpark estimates that could cost you thousands or millions." – God Bless Retirement [1]

Finally, the report should explain why specific methods were chosen, outline their strengths and limitations, and detail how results were weighted. For example, a report might assign equal weight to the income and market approaches if both are equally relevant. This transparency ensures readers understand not only the final valuation but also the analysis behind it.

Supporting Materials and Additional Information

When it comes to structured valuation methods, having comprehensive supporting materials is crucial. This section ensures that every step of the analysis is backed by solid documentation. It provides the foundation for a professional valuation that can stand up to scrutiny from buyers, sellers, financial institutions, and even the IRS.

Financial Details and Term Definitions

Accurate valuations rely on thorough financial documentation. Include complete financial statements - historical, normalized, and projected - for at least three to five years. Don’t forget interim and trailing twelve-month data. Any normalization adjustments should be clearly outlined and supported by relevant market data [5].

For example, if you adjust an owner’s compensation from $250,000 to $150,000 to align with market standards, make sure to document this adjustment with appropriate data [5] [2]. Providing visual aids like charts, graphs, and tables can simplify complex financial trends. A table showing five years of revenue growth or a graph comparing EBITDA margins to industry averages can communicate much more effectively than blocks of text [4] [5].

To ensure clarity, include a dedicated glossary that explains technical terms like "EBITDA", "discount rate", and "control premium." Use plain language and examples to make these terms accessible to non-financial professionals such as business owners and attorneys [3] [5]. This glossary will help bridge the gap between technical jargon and practical understanding.

Analyst Credentials

Credibility starts with transparency. Clearly list your degrees, certifications, and experience in business valuation. Recognized certifications, such as those from the American Society of Appraisers (ASA), Certified Valuation Analyst (CVA), or Certified Business Appraiser (CBA), add significant weight to your conclusions [3] [5].

It’s equally important to specify the professional standards you adhered to during the valuation process. Whether it’s the Uniform Standards of Professional Appraisal Practice (USPAP), AICPA guidelines, or NACVA standards, documenting compliance reinforces the validity of your work [3] [5].

Include a certification statement or signature page that affirms your independence and the integrity of your analysis. This formal acknowledgment not only adds legal weight to your conclusions but also demonstrates your commitment to ethical standards [3] [5].

Data Sources and References

Every external data point must be cited for verification. Your references should include the publication name, date, page number, and specific data points used. For example, if you reference Risk Management Association (RMA) data for financial ratios, specify the report year and industry classification code. Similarly, if you use Federal Reserve or Bureau of Labor Statistics data, provide the exact series numbers and access dates [2] [3].

When using industry reports and market databases, such as IBISWorld, BizComps, or Pratt's Stats, clearly document the datasets and time periods. For businesses with EBITDA under $25 million, proprietary transaction databases are especially useful, as public market data might not reflect the nuances of smaller business sales [2] [5].

For peer group comparisons, justify your choices. Explain why specific transactions were included based on factors like business size, industry classification, location, and timing. This level of detail helps readers understand your selection criteria [2] [3].

Label all supporting exhibits clearly - such as "Appendix A: Normalization Adjustments" or "Appendix B: Industry Benchmark Data" - and reference these throughout your report. Including a table of contents for appendices can improve navigation and demonstrate the depth of your analysis.

For confidential information, take extra precautions. Mark proprietary business data as confidential and consider placing sensitive materials in restricted appendices with limited access [2]. This approach protects client privacy while maintaining transparency - a critical balance for privately held businesses.

Conclusion: Building a Quality Valuation Report

A valuation report is much more than a collection of numbers - it’s a detailed document that plays a critical role in shaping important business decisions. Every element, from the assumptions and methodologies to the financial analysis and supporting data, contributes to the reliability and trustworthiness of the final valuation.

According to the International Valuation Standards Council (IVSC), over 70% of business owners who attempt to value their businesses without professional assistance either overestimate or underestimate their worth by more than 20% [6]. This statistic underscores the importance of professional expertise in ensuring clarity and accuracy when preparing these reports.

The foundation of a strong valuation report lies in clarity, accuracy, and transparency. A well-prepared report clearly outlines how the valuation was determined, documents all key assumptions, and provides evidence to back up major claims. This level of detail is essential for stakeholders such as buyers, sellers, financial institutions, and regulators.

Professional credentials also play a significant role in the acceptance of valuation reports. A 2023 survey by the American Society of Appraisers revealed that reports prepared by credentialed professionals were 3.5 times more likely to be accepted without dispute in legal or regulatory settings [6]. Tailoring the report to reflect the specific circumstances of a business further enhances its credibility and relevance.

Customization is key. While templates can serve as a starting point, they should be adapted to reflect the unique market position and financial profile of the business being evaluated. For companies with under $25 million in EBITDA, working with specialized firms like God Bless Retirement ensures the valuation meets industry standards while addressing the particular challenges of smaller business transactions. Their certified experts deliver the thoroughness and confidentiality that stakeholders expect, providing a report that withstands scrutiny and supports sound decision-making.

It’s also important to recognize that valuation reports are time-sensitive. As market conditions, financial performance, and business circumstances change, these reports need to be updated regularly. Investing in a professionally crafted valuation report not only ensures accuracy but also builds confidence among all parties involved in critical business decisions.

FAQs

What are the main differences between the income, market, and asset-based valuation methods, and when should you use each one?

The income, market, and asset-based valuation methods each cater to different scenarios, depending on the nature of the business and its specific circumstances.

Income-based valuation zeroes in on the company’s potential to generate future earnings. This method works best for businesses with reliable cash flow and steady revenue patterns.
Market-based valuation involves comparing the business to similar companies that have recently been sold. It’s a practical choice when there’s ample market data available for benchmarking.
Asset-based valuation calculates the company’s net assets by subtracting its liabilities from the total asset value. This approach is often applied to businesses with considerable tangible assets or in situations like liquidation.

The choice of valuation method hinges on factors like the business type, financial condition, and the goal of the valuation. For tailored advice, it’s worth reaching out to a professional valuation service. For instance, God Bless Retirement offers expertise in business transactions and certified valuations for companies with EBITDA under $25 million.

How can I ensure the financial metrics and assumptions in a valuation report are accurate and reliable?

To create an accurate and reliable valuation report, start by using verified data sources and meticulously reviewing all calculations. Clearly outline any assumptions made, ensuring they align with realistic, industry-specific benchmarks. It's also crucial to adhere to established valuation standards and methodologies to maintain credibility.

If you need professional guidance, consider partnering with experts like God Bless Retirement. They specialize in certified business valuations and offer access to a network of professionals, such as CPAs and financial planners, to help ensure your report is comprehensive and dependable.

How do factors like industry trends and company management impact a business's valuation?

Qualitative aspects like industry trends and company management are crucial in shaping a business's valuation. These factors go beyond the raw numbers, offering insight into the company's growth potential and overall stability.

For instance, a business with strong leadership and skilled management often signals a well-organized operation with a higher chance of success, which can boost its valuation. Likewise, keeping an eye on industry trends - such as shifts in market demand, the competitive landscape, and broader economic conditions - provides a clearer picture of the company's future prospects and ability to adapt. When combined with quantitative data, these elements help paint a fuller picture of a business's worth.