How Long Is a Business Valuation Good For? Review It Yearly

Prepare the Review Before You Start the Clock

Bring the reconciled earnings and the previous worksheet before you book the management review. Choose a time allowance for each stage from the gaps you need to resolve. If a missing input needs accounting or valuation work, assign it rather than stretching the meeting into an improvised appraisal.

1. Confirm the value date, intended use, earnings period, and owner-pay treatment. Record any item that prevents a comparable calculation.
2. Run the value bridge below and separate the earnings effect from the multiple effect. Keep the multiple’s source year attached.
3. Name the two changes that explain the movement, then give each unresolved check an owner and a next action.

Separate the Review Date From the Value Date

Write down the date the value concerns and the use you intend for the result. Put both beside your number so an internal planning worksheet isn't passed along as an up-to-date transaction assessment.

Record the financial period behind the earnings and the date of the market evidence behind the multiple. A multiple expresses value as a factor of the earnings measure used. Those dates can differ, and updating the financial statements doesn't automatically update the market evidence.

The example's multiple comes from the model's iTValuations 2025 seller's-market curve. It isn't a checked quote for today's buyer market. Keep that year attached when you use it to compare operating scenarios.

If a lender or another party needs a valuation for a specific purpose, ask what date and scope they require before commissioning or reusing a report. Let the valuation professional establish the work needed for that use. Your annual management review should identify that need rather than assume it has satisfied it.

Put Last Year and This Year on the Same Basis

Build a comparison whose figures another person can reproduce. For earnings, start with reconciled financials and show any proposed adjustments separately. An adjustment changes the reported earnings used in the calculation; have your accountant examine the reason and support before treating it as sustainable profit.

Keep the owner's replacement work in the cost base. The model's US example includes $240,000 in owner salary and $271,200 after its owner burden factor. Removing that expense while assuming someone continues to perform the role would overstate the profit available without you.

The US model combines 52% managed services with 21% recurring product, giving a 73% recurring revenue share. That exceeds its 70% planning target. It doesn't give the whole recurring book the managed-service margin: the model's recurring products carry a different margin.

For your own review, keep actual retention separate from the model's 95% planning assumption. Describe any change in the underlying client group before comparing results. A new logo count can conceal a departing relationship if you don't preserve the starting group.

Explain the Earnings Effect Before the Multiple Effect

Recalculate in stages so the result doesn't become a story about whichever input looks most flattering. First hold the previous multiple fixed and apply it to the current earnings on the same basis. Then show the effect of the revised multiple separately, with its supporting evidence.

Prior estimate = prior earnings x prior multiple
Earnings effect = (current earnings - prior earnings) x prior multiple
Multiple effect = current earnings x (current multiple - prior multiple)
Current estimate = prior estimate + earnings effect + multiple effect

For a hypothetical year-to-year comparison, use the model's $500,000 and $1,000,000 EBITDA anchors. Assume last year's normalized earnings were $500,000 and this year's were $1,000,000, with a consistent cost basis. Apply the same historical 2025 curve to both; its size-dependent multiple rises from 4.75 to 6.50 as earnings cross those anchors.

For this hypothetical value bridge, calculate the total movement as $6,500,000 minus $2,375,000, or $4,125,000. Of that, $2,375,000 comes from applying the old multiple to the higher earnings, and $1,750,000 comes from the higher position on the same size curve. The market evidence hasn't changed in this example; both calculations still use 2025 assumptions.

This is a bridge between calculations, not proof that an operational change caused the whole movement. If the earnings basis changed, reconcile that first. Otherwise an accounting reclassification can masquerade as an improvement in the business.

The model's valuation table lists $4,057,386 on the historical model curve and $2,666,513 on the separate conservative adviser curve for the same $730,276 of earnings. Subtract the two planning results: $4,057,386 − $2,666,513 = $1,390,873, with earnings held unchanged. That is the consequence of different valuation assumptions, not money created by switching spreadsheet columns.

Use the unrounded model calculation for that comparison. The displayed 5.56 multiple is rounded, so multiplying it back will not reproduce the precise result. More decimal places would not turn either planning case into a buyer's offer.

Reopen the Estimate When Its Assumptions Move

I wouldn't wait for the annual appointment to record a development that undermines the earnings you are using.

• Review a client departure or contract change that alters expected ongoing earnings, using the actual revenue and delivery cost affected.
• Review a change in staffing or owner responsibilities that changes the cost of delivering the business without you.
• Review new relevant market evidence with your adviser before replacing the multiple, keeping the transaction scope and earnings basis in view.
• Review a proposed sale or other new use with the professional responsible for that valuation, rather than relabeling the internal worksheet.

Keep each trigger tied to the part of the calculation it affects. A documented handover of owner duties deserves a record of the work transferred and the cost retained. Don't assign it a made-up increase in the multiple.

Finish With Two Changes You Can Defend

I'd close the annual review by naming the two changes that matter most to the next decision. For each, record the supporting document and the person responsible for the follow-up. If the effect cannot yet be calculated, state what information is missing rather than forcing a dollar value into the sheet.

In that worked comparison, the two changes to write down are the $500,000 increase in normalized EBITDA and the move from a 4.75 multiple to 6.50 on the same historical size curve. Have finance reconcile the earnings change, and have the valuation adviser check whether that curve is appropriate for the intended use. Neither entry says today's buyers have offered more.

Keep the old worksheet alongside the new one. Save the earnings reconciliation with the multiple's source year so next year's comparison starts from an explained number. If the intended use has changed, commission the assessment for that purpose before relying on the estimate.