If you’re a business owner, understanding how to properly value your company is more than a financial exercise—it’s a strategic necessity. Whether you’re planning to sell, restructure, bring in investors, or prepare for estate planning, business valuation is at the heart of many critical decisions. We help companies navigate these turning points by offering legal guidance rooted in clarity, compliance, and long-term success.
This guide explains what business valuation is, why it matters, and how six key methods are used to determine the economic value of a company.
What Is Business Valuation and Why Is It Important?
Business valuation is the process of determining the economic value of a company. This can include its tangible assets, liabilities, earnings, future cash flow, intellectual property, and market position. There is no one-size-fits-all answer—the method depends on the industry, company structure, goals, and legal context.
We see valuation issues arise most often in:
- Partner buyouts or ownership transfers
- Selling or acquiring a business
- Estate and gift tax planning
- Divorce proceedings involving business assets
Each of these scenarios requires a well-documented valuation process that can stand up to scrutiny. That’s where combining business and legal strategy becomes essential.
Who Needs to Value a Company?
You may need to value your business if you are:
- Preparing to sell or merge
- Bringing on investors or co-owners
- Planning for succession or estate distribution
- Going through divorce or legal separation
- Allocating equity or issuing stock options
We work with business owners, investors and financial professionals to help ensure the valuation process aligns with both business objectives and legal obligations.
6 Proven Methods to Value a Business
Different situations call for different approaches. Here are six of the most widely used business valuation methods:
1. Asset-Based Valuation
This method looks at the net asset value of a business—essentially, what you own minus what you owe. It’s useful for asset-heavy companies like real estate holding firms or manufacturers.
Legal note: We often use asset-based valuation in partnership dissolutions or asset sales. It creates a floor value that may be relevant for buyouts or liquidation scenarios.
2. Discounted Cash Flow (DCF) – The Income Approach
This approach calculates the present value of future cash flow the company is expected to generate. DCF is best for companies with stable, predictable income.
Why it matters legally: In investor negotiations or shareholder disputes, DCF often becomes the most defensible method when projections and discount rates are clearly documented.
3. Market Approach (Comparable Company Analysis)
This method looks at the sale price or market value of comparable businesses. If a similar business sold at 5x earnings, that multiple might be applied to your company.
In practice: This is useful in M&A transactions where we’re advising on deal terms and evaluating offers.
4. Earnings Multiplier Method
A more streamlined version of the income approach, this multiplies the business’s earnings by a standard industry multiple. It’s quick but can oversimplify unique aspects of the business.
Legal insight: We sometimes use this as a starting point, but we caution clients that it may not reflect true value if there are unusual liabilities or intellectual property involved.
5. Book Value Method
This method uses the business’s balance sheet to calculate total assets minus liabilities. It’s easy to calculate but may ignore goodwill or brand equity.
Legal application: In estate planning, this can be a fallback approach when other data is limited or contested.
6. Comparable Company Analysis
Often overlapping with the market approach, this involves benchmarking against public or private company transactions. The key is identifying truly comparable businesses.
Our role: As your attorney, we help evaluate the reliability of comparables and ensure any valuation presented is well-supported and ready for legal review.
What Factors Influence Company Valuation?
In addition to the method used, several factors affect how your business is valued:
- Financial performance: Revenue, profitability, growth trends
- Market position: Competitive edge, customer base, reputation
- Intellectual property: Trademarks, patents, software
- Legal structure: LLC vs. Corporation, state compliance
- Industry trends: Demand shifts, regulation, innovation
- Economic conditions: Interest rates, inflation, market cycles
At J G Miller Law, we help business owners assess these elements through both a financial and legal lens to support more accurate, defensible valuations.
How Do You Choose the Right Valuation Method?
Choosing the right method depends on your goal:
- Selling a business? You may want to blend DCF and market-based approaches.
- Going through litigation or divorce? You need court-ready valuations.
- Estate planning? You may need asset and book value approaches to satisfy IRS standards.
We advise clients on the best strategy for each case and work alongside CPAs and valuation experts to ensure the legal side of the process is solid.
Legal Situations That Require Business Valuation
We routinely help clients with valuation-related needs in these scenarios:
- Business sales and acquisitions: Ensuring accurate valuations for negotiation and documentation.
- Partnership buyouts or disputes: Valuing ownership shares fairly and legally.
- Estate planning: Determining the value of closely held businesses for trusts or wills.
- Divorce: Equitably dividing business interests.
Do You Need an Attorney for Business Valuation?
Yes—especially when:
- The valuation is tied to a legal process (e.g., divorce, probate, sale)
- There’s potential for dispute or negotiation
- The business owns significant intellectual property
- You need documents to be enforceable, not just informational
As attorneys, we don’t compete with CPAs—we collaborate. Our role is to ensure your valuation is legally sound, contractually supported, and aligned with your overall goals.
Ready to Understand Your Business’s Value?
If you own a business in Utah, Arizona, or Texas, and you’re preparing for a sale, dispute, estate plan, or ownership transition, we’re here to help. At J G Miller Law, we offer practical legal support to ensure your business valuation is not just accurate—but strategic.
Book a free consultation to talk about your business, your goals, and how we can help protect what you’ve built.
Key Takeaways
Business valuation is essential for owners considering a sale, dispute, or succession.
- Different valuation methods serve different legal and financial goals.
- Factors like cash flow, market comparables, and legal structure impact valuation.
- Legal guidance ensures the valuation process is strategic, documented, and defensible.
- We help clients in Utah, Arizona, and Texas understand, protect, and transfer business value.
Need guidance? Let’s talk.
