A business valuation is an assessment of what your business is worth. Sounds simple, but there are different ways to get that answer, and they range from free to several thousand dollars. The version you need depends on what you’re doing with the valuation.

If you’re just curious about your business’s value, you might start with an online tool. If you’re preparing to sell, you might want something more formal. And if you’re dealing with a court case, an insurance claim, or a partnership dispute, you might need a professional appraisal.

The Three Types

Online Valuation Tools (Free to $100)

These are DIY tools where you input basic information about your revenue, profit, growth rate, and industry, and a computer calculates a valuation. Sites like BizBuySell, Magnify, and others offer these. Some are free; some charge $50 to $100 to give you a detailed report.

These tools work by comparing your business to actual transactions in your industry. They use real sale data from thousands of deals and apply the same multiples to your numbers. For a small consulting business with straightforward financials, an online valuation can be surprisingly accurate. It gives you a ballpark range—“Your business is worth $300K to $400K”—which is often enough to know if you’re in the right neighborhood.

The downside is simplicity. Online tools don’t understand nuance. They don’t account for customer concentration (if 40 percent of revenue comes from one customer, that affects value). They don’t know about pending litigation or key person risk. For simple businesses, that’s fine. For complex ones, it’s incomplete.

Online tools are great for a first look, and they’re a solid starting point before you talk to a broker or buyer.

Market Analysis ($500 to $1,500)

This is a professional valuation from a business broker or appraiser. They’ll do a deeper analysis than an online tool. They’ll look at your financials, understand your customer base, assess competitive positioning, and research recent sales of comparable businesses in your market. They produce a report that shows their methodology and a valuation range with explanation.

This level of valuation is what you want if you’re seriously considering selling. It’s detailed enough that a buyer will respect it, but it’s not as expensive as a formal appraisal. Most business brokers will do this level of analysis as part of their listing process, often at no cost because they’re being paid by commission if you use them to sell.

A market analysis from a third party also gives you credibility when you list your business. Instead of just saying “I think my business is worth $500K,” you can say “An independent appraiser valued my business at $500K based on comparable transactions.” That carries weight with buyers.

Formal Appraisal ($2,000 to $5,000+)

A formal appraisal is a detailed professional evaluation performed by a certified business appraiser. They’re typically used when you need a valuation for legal or financial reasons—divorce proceedings, partnership disputes, insurance claims, or litigation.

A formal appraisal is much more thorough than a market analysis. It includes detailed financial analysis, industry research, comparable transaction analysis, and multiple valuation approaches (income approach, market approach, asset approach). The appraiser produces a comprehensive report that can withstand legal scrutiny.

For a typical business sale, this level is overkill unless there’s some dispute or unusual complexity. But if you’re in litigation or dealing with insurance claims, it’s what you need.

Which One Should You Get?

If you’re thinking about selling but haven’t made a final decision yet, start with an online tool. It’s free or cheap and gives you a baseline. “What’s my business worth?” is a fair question to explore on your own.

If you’re serious about selling, get a market analysis from a business broker or third-party appraiser. This gives you a realistic, professionally-backed valuation that a buyer will respect. It also helps you market the business effectively because you can back up your asking price.

If you’re embroiled in some legal issue or partnership dispute, get a formal appraisal from a certified appraiser. That’s the gold standard and will hold up in any context.

The Real Value of a Valuation

Here’s the important part: a valuation is not your sale price. It’s not what a buyer will pay. It’s what an independent party thinks your business is worth based on comparable market data and financial analysis.

A buyer might value your business higher if they see synergies (they can run it more efficiently than you did). They might value it lower if they’re risk-averse or if due diligence uncovers issues. A valuation gives you a defensible starting point for negotiations. It says, “Based on market data and financials, here’s what the business is worth.”

Before you list or talk to a buyer seriously, get clear on your valuation. Know what the data says. Know whether your asking price is reasonable. A professional valuation costs a few hundred to a few thousand dollars. It’s one of the best investments you can make before selling because it prevents you from overpricing (and not getting interest) or underpricing (and leaving money on the table).

Start with an online tool to get oriented. If you’re moving toward a sale, upgrade to a market analysis. That’s the sweet spot for most sellers preparing to exit.