This article is valuation commentary. It is not legal, tax, accounting, or investment advice. Pricing references describe current market practice and are not LHM’s fee schedule.
The real question is who relies on the number
If a valuation is only for owner planning, a directional estimate may be enough. If a spouse, the IRS, an estate executor, an SBA lender, outside investors, auditors, or a judge may rely on it, the engagement usually needs more rigor and more documentation. The IRS estate framework, for example, is built on fair market value at the relevant valuation date, and examination guidance shows examiners look at appraisals, financial records, entity agreements, prior sales, and the support for discounts. The more review risk you are buying down, the more work the valuation team usually has to do.
That is why pricing comparisons can be misleading. A $1,500 calculation report and a $15,000 conclusion-of-value opinion are not the same product at different price points. They answer different questions, follow different professional standards, and survive different kinds of scrutiny. Choosing the wrong one is a more expensive mistake than choosing the more expensive one.
The three report types in plain English
- Range of value, often single-method
- Limited documentation
- No professional standards opinion
- Doesn’t survive IRS, audit, or court review
- Not suitable for tax filings
- Uses agreed methods, less than full procedures
- Less rigorous than a conclusion of value
- Documented and signed by the analyst
- Generally not for IRS, court, or audit review
- Limited reliance, narrowly defined users
- All relevant valuation methods considered
- Full SSVS-1 / USPAP / IRS-acceptable documentation
- Defensible under cross-examination
- Not the cheapest option
- Takes longer to scope and produce
What actually drives cost
There is no authoritative published fee schedule for business valuations. What can be said from current market practice is that price moves with the same handful of factors across virtually every reputable provider:
| Cost driver | Typical impact | Why it matters |
|---|---|---|
| Purpose & reliance | High | Tax, court, audit, and SBA reliance require formal standards. Internal-only is the cheapest tier. |
| Standard of value | Medium | Fair market value (IRS), fair value (statutory), investment value, going-concern value each call for different procedures. |
| Capital structure | High | Multiple share classes, preferred stock with rights, options, warrants, SAFEs, convertibles, and earnouts each add work. |
| Asset complexity | High | Real estate, equipment, IP, regulatory licenses, and goodwill each require their own analysis. Property-rich entities cost more. |
| Quality of records | Medium | Reviewed financials and a clean cap table cost less to value than incomplete books and disputed agreements. |
| Discounts & premiums | Medium | DLOM, DLOC, control premiums, and minority discounts each require evidence-backed support. |
| Timing | Low–Med | Standard turnaround is weeks. Rush work commands a premium because of the analyst hours compressed into shorter calendar time. |
| Reviewer scrutiny | High | If the IRS, an opposing expert, an auditor, or a court will read the report, the documentation requirements rise materially. |
When a directional estimate is enough
Not every valuation question needs a formal report. There are clean cases where a directional internal estimate or calculation answers the question without overspending.
- The user is the owner, considering options privately
- No external party will rely on the number
- The business is straightforward (single class, no real estate)
- There is no near-term tax filing, court date, or audit
- The question is “ballpark, is this worth pursuing”
- The IRS, a court, an auditor, or a lender will read it
- It supports a tax filing (estate, gift, 409A, ESOP, ASC 805)
- The interest is a minority or illiquid stake requiring discounts
- Capital structure includes preferred, options, warrants, or convertibles
- The business owns real estate or operates a going concern
- Outcome will affect a material settlement, payout, or transaction
What information speeds up scoping
Scoping a valuation accurately costs the firm time before a fee can be quoted. The faster a prospective client can supply the basic facts, the faster a real fee estimate can come back. Most boutique firms can scope an engagement in one or two short calls if the following information is on hand:
- Purpose of the valuation. Tax, litigation, transaction support, internal planning, ESOP, financial reporting, divorce, partner buyout, lender support.
- Standard of value and effective date. Often set by counsel or by the regulatory framework. If unknown, a brief intake call usually clarifies.
- Likely users and review risk. Will the IRS see this? An opposing expert? An auditor? A judge?
- Entity structure. One operating company or a holding/operating split. Whether real estate is held inside the operating entity or in a separate PropCo.
- Capital structure summary. Common only, or also preferred, options, warrants, SAFEs, convertibles, profits interests.
- Three to five years of financial statements and tax returns. Plus current year-to-date if the valuation date is recent.
- Material agreements. Buy-sell, shareholder agreement, operating agreement, recent transactions in the company’s stock.
- Real estate inventory if relevant. Whether owned, leased to related parties, or subject to a ground lease.
- Deadline. Hard or soft. If hard, the calendar date and what triggers it.
Frequently asked
How LHM scopes engagements
Every LHM engagement starts with a scoping conversation: purpose, users, standard of value, valuation date, asset and entity structure, deadline, and any known review risk. That conversation usually takes 20–30 minutes and produces a written engagement scope and fee estimate. We don’t quote a fee without it because a fee quoted blind to those facts is either too high (padded for the unknowns) or too low (likely to require a scope change later).
The credentialing matters because it determines what the report can be used for. LHM holds California Certified General Real Estate Appraiser credentials and ASA Business Valuation candidacy. That dual-discipline footing matters most where the engagement involves both real property and a going-concern operating business, which is where many of the harder valuation questions arise.