What Is My Business Worth Before I Have an Offer?
On this page 5 sections
Name the ownership interest and valuation date first
“What is my business worth?” sounds like a request for one number. It is really a request to define the question before the number can mean anything.
Which ownership interest is in view? Is this early sale planning, an internal transfer, an estate matter, or a response to an actual offer? What is the valuation date? Which entity owns the operating results and the assets under discussion?
Revenue Ruling 59-60 comes from federal estate and gift tax valuation, not a negotiated company sale. Within that setting, it identifies the business history, economic outlook, book value, earning capacity, dividend capacity, goodwill, prior sales, and comparable-company information among the relevant facts. 1 The enduring lesson is not a formula. It is that a value conclusion belongs to a defined subject and date.
Until those are named, a multiple is just a familiar-looking answer to an unfinished question.
The earnings that remain after your job is covered
The earnings question gets personal quickly because owner pay and owner work rarely match perfectly.
Payroll may show one salary while you also price unusual jobs, protect major customer relationships, approve hiring, manage cash, and handle the calls no one else wants. A buyer still needs those decisions made. Removing your compensation without covering the work makes the company look more profitable by pretending part of the company disappears.
The IRS material specifically notes one-person management and the availability of trained successors among the valuation facts in its setting. 1 For sale planning, that sends us to the operating record: duties, hours, relationships, credentials, current backup, expected post-close role, and replacement cost.
Once the work is visible, disagreements become more useful. Someone can challenge the period, remove an adjustment, or change the replacement cost. The range moves for a named reason instead of because a person prefers a different multiple.
A multiple has to match its price and earnings labels
Outside transactions arrive with missing labels. The price may mean enterprise value or equity value. The consideration may include deferred payments. The earnings measure could be SDE, EBITDA, adjusted EBITDA, or something calculated for a different period.
CFA's market-based valuation material requires consistency between the price measure and the earnings denominator. 2 A private-company observation also needs a date, size, ownership interest, industry context, and enough transaction detail to know what the headline contains.
We would rather discard a famous multiple than force it onto incompatible earnings. Before an observation enters the range, write down its price label, earnings label, period, and known deal terms. A blank field does not make the transaction useless, but it tells you how little weight the comparison can carry.
The business valuation methods guide explains why an income, market, and asset approach can disagree even when each is competently applied.
The private-company valuation desk keeps those methods beside the earnings and offer questions without collapsing them into one calculator output.
The four questions that can change an early range
Scroll for all columns| Question | Record beside it | What it can change | What it cannot establish |
|---|---|---|---|
| What is being valued and when? | Ownership record purpose and valuation date | Whether the range answers the same assignment | A company value or chosen multiple |
| Which earnings survive the owner? | Reconciled period owner pay duties and replacement record | The maintainable earnings discussion | A buyer-accepted adjustment |
| What did the observed multiple price? | Price label denominator period size and known terms | The weight given to an outside observation | A comparable endpoint for this company |
| What would an offer pay and when? | Closing statement debt cash working-capital escrow and later-value documents | Cash at closing and retained or contingent value | The earlier enterprise-value range |
Company value and the cash you receive are different answers
An early range usually values the operating company before an actual offer has supplied debt, cash, working capital, expenses, escrow, a seller note, an earnout, or rollover equity. Those items do not belong inside a made-up proceeds bridge.
They do matter once terms exist. In our transcription of 25 selected Axial closed-deal profiles, the median disclosed cash component was 81 percent. Axial says the cases are nonrepresentative and that member-supplied information cannot be fully verified. 3 We use the figure to show variation in payment structure, not to forecast your closing wire.
The enterprise-value and equity-value guide follows an actual offer through the balance sheet and payment terms. Until that offer exists, keep the value range and proceeds question on separate pages.
The first honest range is the one that can survive someone else changing a source-backed assumption.
IRS, CFA Institute, and Axial records behind the calculation3 sources
- Internal Revenue Service — S Corporation Valuation Job Aid Appendix A Revenue Ruling 59-60
Fact-specific valuation framing and one-person manager considerations in the ruling's federal tax context. Limit: The job aid is not an official IRS position and does not select a sale multiple or value a company. Accessed 2026-07-28.
- CFA Institute — Market-Based Valuation Price and Enterprise Value Multiples
Price-measure and earnings-denominator consistency in market-based valuation. Limit: Public-company education; private transaction documents determine the purchase-price bridge. Accessed 2026-07-28.
- Axial — The Winning LOI Volume 3 Issues 51 to 75
Disclosed cash, rollover equity, seller note, earnout, and other-consideration fields for 25 selected closed deals. Limit: Featured cases are nonrepresentative and member-supplied data cannot be fully verified. Accessed 2026-07-28.
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