Caution with valuations

January 09, 2026

by a professional from Case Western Reserve University in Philadelphia, PA, USA

A valuation is just an estimate. Sometimes an educated estimate but it should be used as a baseline to give you a ballpark of what a company is worth. It should not be thought of as precisely what a company will end up selling for. Let's assume a company has a $10m valuation The company may sell for $8m to an all-cash buyer who can close in 30 days or $12m with a large seller's note and SBA 7a loans. Often we see complex valuation methods that feel as if there is a science to company values. I would be cautious not to overly focus on these numbers as absolutes but rather to use them as a way to generally think about what the company may sell for. Keep in mind the market cap (real time liquid value) of publicly traded companies changes by billions of dollars day to day, the value of small privately held businesses can also change a lot depending on who the buyer is and the condition of the business.

Reply by a professional
from University of Bristol in London, UK

This is all very true - that's why we professional valuers describe our outputs as 'opinions', and in truth a range of robust and supportable values will exist for any company. What I would add though is how those valuation methodologies can be useful. Any valuation should reflect an assessment of the money you will eventually get back from the investment, suitably discounted for the appropriate degree of risk and time to realise that value. The process of applying those methodologies is useful therefore in making you think about how and when that value should crystallise. Thanks ^redacted‌ for the tag.

Reply by an intermediary
in United States

This is very true. We always use a range as BOV.

+6 more replies.

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