What Documents Do You Need for a Business Valuation?

Getting a business valuation can feel overwhelming — especially when you’re not sure what paperwork you'll need to gather. The truth is, a thorough valuation requires quite a bit of documentation, but understanding what's needed ahead of time can save you weeks of back-and-forth requests.

The quality of these documents directly affects how valuation conclusions are reached.

The documents required for a business valuation fall into several key categories, and the specific requirements can vary depending on your industry, business size, and the purpose of the valuation. Here's what you should expect to provide.

Core Financial Documents

Your financial records form the backbone of any business valuation. Clear, accurate, and complete financial documentation helps valuators understand how your business is performing and spot trends over time. These documents are critical in painting a reliable picture of your company’s revenue, expenses, profits, and cash flow.

Tax Returns: You'll need complete business tax returns for the past 3-5 years, including all schedules and supporting documentation. This isn't just the summary pages—valuators need to see depreciation schedules, K-1s for partnerships, and any shareholder information. Tax returns carry significant weight because they represent information that's been submitted to the IRS.

Profit and Loss Statements: Provide detailed P&L statements for the same 3-5 year period, along with a current year-to-date statement compared to the previous year's same period. These documents help valuators understand your revenue trends, cost structure, and profitability patterns.

Balance Sheets: Historical balance sheets for 3-5 years plus a current balance sheet as of the most recent month-end. These show your assets, liabilities, and equity position over time.

Cash Flow Information: Include any cash flow forecasts you've prepared, as well as detailed breakdowns of cash flow from operations. This helps valuators understand how cash moves through your business.

Legal and Corporate Documents

Your business structure and legal standing significantly impact valuation. “Due diligence for a business acquisition involves a review of documentation covering legal structure, IRS records, insurance, organizational structure, personnel policies, operations, capital, real estate, contracts, technology, and potential liabilities. This process is critical and should be considered the foundation of the entire deal.” (Source: CABB Due Diligence)

Corporate Documents: Articles of incorporation, operating agreements, partnership agreements, bylaws, and any amendments to these documents.

Contracts and Agreements: Current lease agreements are particularly important since they affect both operational costs and business transferability. You'll also need copies of significant supplier agreements, customer contracts, employment agreements, non-compete agreements, and any franchise agreements.

Loan Documentation: Provide details of any loans to or from the business, including loan agreements, promissory notes, and current balances.

Insurance Coverage: A current summary of all business insurance policies, including general liability, property, key person, and any other relevant coverage.

Asset Documentation

A comprehensive inventory of your business assets helps determine total enterprise value.

Tangible Assets: Create detailed lists of equipment, machinery, vehicles, inventory, and real estate owned by the business. Include purchase dates, current condition assessments, and any appraisals you have.

Intangible Assets: Document patents, trademarks, copyrights, customer lists, licensing agreements, and other intellectual property. These assets can represent significant value, especially in service-based businesses.

Inventory Details: Provide a current inventory count valued at cost, including any obsolete or slow-moving inventory that should be adjusted.

Operational Information

Valuators need to understand how your business operates day-to-day and what drives performance.

Sales Analysis: Break down sales by customer, product line, or service type. Include information about your top customers and what percentage of revenue they represent. Customer concentration can significantly impact valuation.

Customer concentration is one of the most important value drivers buyers evaluate.

Employee Information: Provide details about key employees, including compensation levels, roles, and any critical dependencies on specific individuals.

Market Position: Document your competitive position, market share information, pricing strategies, and what differentiates your business from competitors.

Compensation and Adjustments

One of the most critical aspects of small business valuation involves understanding owner compensation and benefits.

Owner Compensation: Prepare a detailed schedule of all compensation paid to owners and family members for each year being analyzed. This includes salaries, bonuses, benefits, personal expenses paid by the business, and any other perks.

Add-backs and Adjustments: Create a comprehensive list of one-time, non-recurring, or non-operating expenses that should be added back to normalize earnings. Common examples include owner's personal expenses, one-time legal fees, non-recurring repairs, or unusual travel expenses.

Clear documentation here prevents issues during buyer diligence later.

Industry-Specific Requirements

Different industries may require additional documentation. For example:

Manufacturing: Environmental compliance reports, safety records, equipment maintenance logs, and supplier dependency analysis.

Professional Services: Client retention rates, billing rate information, and professional licensing documentation.

Retail: Location analysis, foot traffic data, and seasonal sales patterns.

Technology: Development costs, user metrics, recurring revenue breakdowns, and intellectual property valuations.

Organization Tips

The key to a smooth valuation process is organization. Create separate folders for each category of documents and ensure everything is current and complete. According to industry best practices, missing or incomplete documentation can delay the valuation process by weeks or even months.

Consider creating a master PDF checklist and gathering these documents before you actually need them. Having everything organized not only speeds up the valuation process but also demonstrates professionalism and transparency that can enhance your credibility with potential buyers or stakeholders.

What Valuators Look For

Beyond just collecting documents, understand that valuators are looking for consistency and accuracy across all your records. They'll compare your tax returns to your internal financial statements, verify that asset lists match balance sheet entries, and look for any discrepancies that need explanation.

The goal isn't just to provide information—it's to paint a complete and accurate picture of your business's financial health, operational efficiency, and growth potential. Each document serves a specific purpose in building that comprehensive view.

Digital vs Physical Records

Most modern valuations can be handled with digital copies of documents, but ensure all files are clear and readable. PDF formats work best, and organizing files with clear naming conventions makes the process smoother for everyone involved.

Some valuators may request original documents for critical items like real estate deeds or major contracts, but this is typically only necessary for formal valuations related to legal proceedings or major transactions.

The document gathering process might seem extensive, but remember that thorough preparation leads to more accurate valuations and smoother transactions. Taking the time to organize everything properly upfront saves significant time and potential complications down the road. Most business owners find that going through this process often provides valuable insight into their own operations and financial position.

---

Accurate valuations start with solid documentation

The strength of a valuation depends on the quality and clarity of the information behind it. Knowing what documents matter — and why — helps ensure your business value is properly understood and defended.

Explore our Business Valuation articles

---