What a Valuation Requires
An accurate business valuation is built on the business's financial records — primarily three years of tax returns and financial statements, year-to-date financials, and the detail needed to calculate SDE or EBITDA with proper add-backs. Gathering these makes the valuation faster and more accurate, and it doubles as preparation for the due diligence a buyer will later run.
Get a confidential, no-obligation valuation based on your real numbers — SDE, add-backs, and all. No pressure, just a straight answer.
The Core Financial Documents
- Three years of business tax returns
- Three years of profit & loss statements and balance sheets
- Year-to-date (interim) financials for the current year
- A list of add-backs — owner compensation, personal expenses, one-time costs — with support
- A business debt schedule
These let the valuer normalize the numbers and establish true earning power.
Supporting Information
- Accounts receivable and payable aging
- An equipment / fixed-asset list and inventory value
- The lease and any real-estate details
- Payroll records and an employee roster
- Customer concentration information (share of revenue by top customers)
- Bank and merchant statements for verification
This context lets the valuer assess risk factors — concentration, asset condition, lease strength — that shape the multiple, not just the earnings.
Why Each Piece Matters
Tax returns are the credibility anchor — they're what you told the IRS, so buyers and valuers trust them. Financial statements show detail and trend. Year-to-date figures reveal the current trajectory. Add-back detail turns reported profit into true earning power. Asset, lease, and customer information calibrate the risk and therefore the multiple. Missing or inconsistent documents force conservative assumptions that can lower your valuation.
Getting Your Documents Ready
Assemble these in one organized package before your valuation — and keep them ready for the buyer's diligence later. Clean, consistent, well-documented financials don't just speed the process; they build confidence and protect your value. If your books are messy, cleaning them up is one of the highest-return steps in preparing to sell. Then get a professional valuation.
Frequently Asked Questions
What documents are needed to value a business?
Primarily three years of business tax returns and financial statements (P&Ls and balance sheets), year-to-date financials, a documented add-back schedule, and a debt schedule. Supporting items include AR/AP aging, an equipment list, the lease, payroll records, customer concentration data, and bank statements for verification.
How many years of financials do you need for a valuation?
Typically three years of tax returns and financial statements, plus year-to-date financials for the current year. Three years shows the trend and lets the valuer normalize the numbers, while the current-year figures reveal the present trajectory.
Why are tax returns important for a business valuation?
Tax returns are the credibility anchor, they're what the owner reported to the IRS, so buyers and valuers trust them as a reality check on the financial statements. Valuations and offers are built on earnings that reconcile with tax returns; figures that don't match the returns are discounted or disregarded.
What happens if my financial records are incomplete?
Missing or inconsistent documents force a valuer to make conservative assumptions, which can lower your valuation, and they raise red flags for buyers in due diligence. Clean, complete, well-documented financials produce a more accurate and defensible valuation and protect your price, so it's worth organizing them before valuing or selling.
Ready to Get an Accurate Valuation?
Martin Navarro will tell you exactly what to gather and value your business accurately from it. Get a confidential valuation, no obligation.
Request a Free Valuation Call or text: 818-633-3254 · 365navarro.martin@gmail.com