If you are engaged and a business owner, it is important to have your business professionally valued for purposes of your prenup financial schedule, whether you own all or part of the business. The valuation should be included as part of the financial schedule in the prenup, which outlines each spouse’s assets, liabilities, and income. Adding the business valuation as backup documentation to the prenup provides clarity for both parties, helps with future enforcement, and eliminates the argument that either party would not have entered into the agreement had they only known the value.

To practically determine the value of your business, there are a few approaches you can take depending on your resources, the complexity of your business, and the purpose of the valuation:

Last Round of Funding

If your business has gone through a recent funding round, such as venture capital or other investments, the valuation from that round can be a good starting point. The price investors were willing to pay for a stake in the company reflects how much they believe the business is worth. This valuation may not account for recent changes in your business or market conditions, but it can provide a solid baseline if your business has received professional attention and investment. However, keep in mind that this is only one perspective—investors are looking for returns, and their valuation might not fully reflect the business’s true worth to you or in other contexts (like a divorce).

DIY

If you’re looking for a quick estimate or trying to get a rough idea of your business’s worth, you can try valuing it yourself by looking at key financial metrics. This is not foolproof and can lead to issues down the line if this value is ever in dispute. If you choose this DIY approach, you can use the asset-based approach by calculating the value of your business’s assets (e.g., real estate, inventory, intellectual property) minus its liabilities. Alternatively, if your business generates steady income, you can use a multiple of earnings method (like EBITDA) or revenue-based multiples common in your industry. However, valuing a business yourself can be challenging, especially if you don't have experience in financial analysis. It’s often difficult to assess subjective factors like goodwill, market position, or growth potential.

Here’s what the financial experts have to say about DIY business valuation:

"While it might seem tempting to perform your own business valuation, it's risky. Without proper financial analysis, you could overlook important factors like market position and future growth potential—elements that can significantly impact the true value of your business. Hiring a professional ensures you have an accurate, credible valuation that takes all relevant factors into account." – Bob Gorton, CPA and expert witness on business valuations in divorce trials.

Hiring a Professional Business Appraiser

For an accurate, objective, and legally defensible valuation, especially in high-stakes situations like divorce, hiring a professional business appraiser is often the best choice. A certified business appraiser will use established methods to assess your business’s worth, such as the income approach (Discounted Cash Flow), market approach (comparable sales), or asset-based approach. Appraisers are skilled at considering all relevant factors, including business risk, market conditions, and intangible assets like brand value or customer loyalty. While hiring an appraiser comes with a cost, the result is a thorough and reliable valuation that can be used in legal documents such as your prenup.

Remember: This information is for general guidance only and should not be considered legal advice. If you have specific questions about how to value your business in your prenup, book a Q&A with an attorney in your state, which you can do directly through your HelloPrenup portal!

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