A business valuation checklist is the list of what the owner has to have in hand before the arithmetic means anything: the statements the earnings come from, the add-backs with the evidence for each, the multiple and where it came from, the inventory counted rather than guessed, the equipment at a value both sides could agree, and the facts about the lease, the customers and the staff that decide the multiple. A business valuation form is the checklist with the numbers filled in, and it is the input to the tool and to the report. This page lists the checklist in the order to work it, says how to value inventory for the line that trips most owners, and points at the free business valuation template on this site that holds the form, with no account.
The statements and the earnings: what to gather first
The profit and loss statements for the trailing twelve months, the last two or three years' tax returns, the balance sheet at the latest date, and the general ledger for the add-back items. From those, the net income for the twelve months, and then each add-back with its evidence: the owner's salary and benefits from payroll, the interest from the loan statements, the depreciation and amortization from the tax return, the personal expenses with receipts that show they were personal, the one-off costs with the reason they will not recur, and any non-recurring revenue taken out the other way. The IRS Schedule C is the source for a sole proprietor; the discretionary earnings on the hub's example, $180,000, are what this part of the checklist produces.
How to value inventory for the inventory line
Inventory is added to the earnings value at cost, not at retail and not at what it would cost to replace today, and it is counted, not estimated from the balance sheet. Count the stock on hand at the date, price each item at what it cost, remove what is obsolete, damaged or unsaleable, and the total is the inventory line: $36,000 on the hub's example, taking $450,000 to $486,000. Work in progress and raw materials are the same count at cost; consignment stock is not the owner's and is left out; and a buyer will recount at closing, so the figure on the form is the figure that will be checked. The Financial Accounting Standards Board's standards govern how inventory is carried on the books the count is reconciled to.
The multiple, the equipment and the facts behind them
The multiple and where it came from: a broker's quote, a known sale, a rule of thumb the owner applies, entered as a low, a middle and a high. The equipment at a value both sides could agree, in place and in its condition, with a list. Then the facts the multiple rests on, which the buyer will ask about before the number: the lease's term and whether it assigns, the share of revenue from the largest customers, the staff who would stay and on what terms, the licences and whether they transfer, and the cost of replacing whatever the owner does that a buyer must hire, which the Bureau of Labor Statistics' wage data prices. The form holds those as fields so they are answered once.
The business valuation form: the order to work it in
Statements first, then the earnings and each add-back, then the inventory count, then the equipment list, then the multiple with its evidence and the facts behind it, then the value at three multiples as a range with a midpoint, then the purpose. Worked in that order, the form is the input to the small business valuation tool and the report tool on this site, and the report prints from it. The free business valuation template holds the form with no account; the paid plan files each completed form against the business and the date, so the checklist is done once per valuation rather than reconstructed each time, and the Small Business Administration's guide to selling a business covers what the buyer's diligence will ask for beyond it.
Questions people ask about business valuation checklist
What is on a business valuation checklist?
The trailing twelve months' statements and tax returns, net income and each add-back with its evidence, the inventory counted at cost, the equipment at agreed value, the multiple with where it came from, the facts behind the multiple (lease, customers, staff, licences, replacement cost), and the purpose.
How do I value inventory for a business valuation?
Count it at the date, price each item at cost, remove obsolete or unsaleable stock, leave out consignment stock, and add the total to the earnings value as its own line. $36,000 on the hub's example takes $450,000 to $486,000.
Is there a free business valuation form?
The business valuation template on this site holds the form and prints the report from it, with no account. The paid plan files each completed form against the business and the date.