Who checks what · Before you buy
Does a business valuation verify the business?
Published · Reviewed by The Diligence Standard Team · Updated
A valuation can test whether price appears reasonable under specified assumptions. Its reliability depends on the earnings, forecasts and risk inputs used. Unless the scope says otherwise, it does not prove that every underlying input is accurate or transferable.
A realistic transaction story
Ethan received a valuation supporting a $1.6 million price for a landscaping company. The report used normalized earnings supplied by the seller. A later owner-role review showed that replacing the seller required two positions, reducing the dependable earnings base.
What the evidence changed
The valuation method was not the problem. A material input changed after deeper operational testing.
What to check
- Write down the exact claim and who supplied it.
- Ask what was independently tested, by whom and under what scope.
- Read the valuation assumptions and separately verify every input that materially drives the conclusion.
- Translate any unresolved gap into cash, price, terms, timing or a decision not to proceed.