Business Valuation: Do You Need a Conclusion or Opinion of Value or a Calculation of Value?

In business valuation a conclusion or opinion of value is the product of a thorough review of every available element of the business.  Investigations for conclusions start with the greater economy and work down to most minute details about the subject company.

The business valuation analyst is required to have a thorough knowledge of the business in compliance with set standards.  Doing this work and collecting all the backup supporting data raises costs but produces a better value estimate and report.

Usually a conclusion of value will be supported by a very detailed report where another valuation analyst can follow each step and understand the reasoning for all assumptions and duplicate all calculations.

Conclusions are often required for compliance reporting purposes and full scale litigation.

If you are going to make important final decisions with large legal repercussions you want an opinion of value.

In business valuation a Calculation of value is where you and the valuation analyst agree on which business valuation methodologies will be used and the specific level of depth of review of the business.

Since many things that might impact business value are not looked at clearly the calculation of value may not have the same findings as if all the work for an opinion had been performed.

These calculations of value are usually sufficient for planning purposes and for an idea of possible sales prices for merger & acquisition type work.  Calculations of business value may be sufficient for mediation or pre-litigation where the parties still have some level of trust and are trying to reach agreement.

In some jurisdictions calculations may be suitable for smaller simpler litigation type matters but sometimes the valuator will not allow them to be used in a trial setting out of a justified fear that your evidence (the estimated value) will fall apart for not being thoroughly prepared on cross examination.

Therefore calculations of value are usually suitable for smaller businesses for planning purposes.  Conclusions or opinions of value are best for compliance and full scale litigation or major decisions that could result in litigation.


Clients choose Harvest Business Advisors for our accurate business valuations and our consistent ability to deliver the highest price in the smoothest sale transaction possible. Harvest provides business brokerage, business valuation, and business succession planning services. We have extensive experience in the information technology and professional services, manufacturing, distribution, and contracting fields. We maintain offices in Maryland, New Jersey and Virginia. Connect with us at or 443.334.8000 to discuss selling your business, ordering a business valuation or buying a business.

Business Valuation – Do I really need an Opinion or Conclusion of Value?


When having a business valuation performed what is the difference between a Rule of Thumb, a Calculation, and an Opinion of business value?

You “just” need a value for your business.  We hear that all the time, “just” followed by can you, “just give me a number” sometimes even followed by, “what is the rule of thumb?”  You might need this business value for planning purposes, to add a partner, a dispute or divorce, to go to market in a private sale, or for compliance purposes like an ESOP valuation or estate and gift tax filings.   But, how accurate should that business valuation really be?

Want to know more?  Please click here for the downloadable e-book. “7 Things You Must Know Before You Order a Business Valuation” 

Accuracy is determined by the level of the work specified in your engagement agreement.  In my mind, the simplest way to look at the question is that a Rule of Thumb is a guess, a Calculation can be used when “good enough” will do, and an Opinion of Business Value is required when it has to be “absolutely positively right” and provable later.

Not surprisingly, there is a difference in cost.  A rule of thumb guess is often free for the asking, if you do your own math.  On the other extreme is an opinion of value, which—depending on the size and complexity of the business— can run from $2,500 to $25,000 or more with most being in the $4,000 to $10,000 range.

What level valuation do you really need?  As usual in business valuation, the answer is that it depends.  So, let me try to expand on that.

Rule of Thumb – the “guess.”  Rules of thumb are not considered business valuations at all.  They are more of an educated or, perhaps, uneducated guess.  Frankly, in some industries, they are reasonably accurate and, in most, they are almost useless.  They are often a multiple of units of production or perhaps revenues.  For instance, “accounting firms sell for 1 times revenue” is a widely quoted rule of thumb.  Depending on the other transaction terms and the underlying business, that might be true.  Years ago, another rule of thumb was “portable toilet firms sold for $1000 per toilet in the field.”  These are useful only for very speculative planning purposes.  In many cases, they cause more harm than good; however, if you just need a guess number, in some industries, this is a place to start.

Calculation of Value – “when good enough will do.”  A calculation of value is when the valuer and the client agree on specific methodologies to be applied to estimate a value.  Usually, there is a limitation on the depth of the investigation and research to be performed.  Generally, a calculation of value will cost between 50-70% of an opinion of value for the same business.  Since not all valuation methodologies are considered and there is less review of data and, perhaps, less support for assumptions, these valuations are not as reliable as an Opinion or Conclusion of value.  In fact, the engagement letter and any written report are required to state that:

“This Calculation Engagement did not include all of the procedures required for a Conclusion of Value.  Had a Conclusion of Value been determined, the results may have been different.”

If the parties are friendly (bearing in mind that friendly can change quickly, when a value is provided) and agree that the underling information is reliable, for most internal planning purposes a calculation of value is suitable.  Calculations are generally not suitable for dispute situations or for many compliance situations, such as ESOPS and estate and gift tax business valuations.

Opinion or Conclusion of Value – This is the gold standard in business valuation, when it has to be “absolutely positively right.”  The valuer is required to investigate everything from the economy to the industry to the details about the financial and operational conditions of the business.  All valuation methodologies are available with the valuer selecting the best one to use based on the facts and circumstances.  While not a financial audit, reasonable investigation is to be performed when situations or findings are questionable.  This level of review is usually followed with a report that specifies all data used and pretty much every assumption and estimate made in order to come up with the Opinion of Value.  The work should be able to be followed by another valuer and fully supportable.  This level is generally used in compliance situations, dispute situations, and when litigation is likely.

One final word.  Cost is important, but you do not save money if you really need the right answer and you need it to hold up under review possibly years later.  Many times, business valuations are prepared when people may have different views as to the proper value.  These different views tend to become louder once the business valuation is complete.  Whatever you do – do not mislead the valuer (you would not believe how many times this happens) and say the purpose is for preliminary planning purposes if you plan on buying a partner out in a difficult situation.  If that might be the case, nothing but an Opinion will really suffice.  Yet, unless required for compliance purposes or disputes, often a calculation of value will serve you well for many valuation purposes.

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