Long-time business owners often overvalue their company because of emotional attachment, or undervalue it because they have never seen it from the outside. Either way, a realistic valuation is the starting point for good business planning. It doesn’t always require an expensive formal appraisal.
Key takeaways
- A realistic business value matters for retirement planning, fair buy-sell terms and financial justification of coverage.
- Formal valuations can cost $20,000 or more, which keeps many owners from getting one.
- Some carriers offer free informal valuations using a simple questionnaire and three years of financial statements.
A formal valuation can run as high as $20,000, which is why many owners never get one.
Why owners need a realistic valuation
- Retirement planning. Many owners count on the sale of the business as a major retirement asset.
- Fair transition terms. A buy-sell or other transition agreement should be reasonable and equitable for everyone.
- Financial justification. If the buyout is insured, carriers need a supportable value to justify the coverage amount.
Our article on buy-sell planning for business transitions explains how the value flows into the agreement.
Price vs. value
A real estate agent we know describes long-time homeowners who see the staircase their children crept down every Christmas morning, while buyers see a loose banister and worn carpet. Business owners can face the same gap. Part of an advisor’s role is to gently bring an outside view into the conversation.
Informal valuations at no cost
Formal valuations are thorough but can cost $20,000 or more. For planning purposes, an informal valuation is often enough. We work with carriers that, as a service, prepare informal business valuations from a simple questionnaire and three years of financial information. The results:
- Estimate the company’s worth using several common valuation methods
- Are formatted for the client and their tax and legal advisors
- Support coverage amounts for buy-sell and key person coverage
Availability varies by carrier, so contact us to confirm current programs.
How SRS supports the process
We can help you gather the data, request the valuation and present the findings to the client and their advisors. Contact us to start a valuation for a business owner client.
Frequently asked questions
Why does a business owner need a valuation for life insurance?
Carriers need a supportable business value to justify buy-sell and key person coverage amounts, and the agreement’s price should reflect what the business is actually worth.
How much does a formal business valuation cost?
A thorough formal valuation can cost $20,000 or more depending on the business and the appraiser.
What is needed for an informal valuation?
Typically a short questionnaire about the business and three years of financial statements.
Reviewed by Tim Fuller on 2026-09-26
Tim Fuller
President, SRS Inc.
Tim leads SRS Inc., a full-service IMO (Independent Marketing Organization) and BGA (Brokerage General Agency), connecting independent financial professionals with life, annuity, disability income, and long-term care solutions from 60+ carrier partners.
Connect on LinkedIn →We’re Here to Help
Have a question about what you just read, or a case you’re working on? Tell us a bit about what you need, and a member of the SRS team will follow up with you personally — no obligation, no hassle.
