1
Define the purpose and identify the subject shares
State clearly why the valuation is being prepared — buyout, equity transfer, option plan, or dispute resolution. Specify the exact number of shares and the share class being valued.
💡 Locking the purpose in Section 1 prevents scope creep and limits the document's use to the intended transaction.
2
Describe the company and its share structure
Summarize the business, its industry, legal form, and jurisdiction. List all issued share classes with their voting rights, economic rights, and the percentage the subject shares represent.
💡 Pull this data directly from the company's most recent shareholders register and articles of incorporation to ensure consistency with governing documents.
3
Set the valuation date and gather financial statements
Choose a valuation date that is defensible for the transaction — typically the date of the triggering event (notice of exit, offer date) — and assemble audited financials for the three most recent fiscal years plus the latest interim period.
💡 Using audited rather than management-prepared financials increases credibility significantly when the proposal is reviewed by the other party's advisors.
4
Select and justify your valuation methodology
Choose a primary method (income, market, or asset) and at least one cross-check method. Write one paragraph explaining why the primary method best reflects value for this company given its stage, industry, and cash flow profile.
💡 For asset-heavy businesses (real estate, manufacturing), lead with the asset approach. For recurring-revenue businesses (SaaS, professional services), the income approach is typically more persuasive.
5
Input and normalize the financial data
Enter the company's historical revenue, EBITDA, and net income. Adjust for one-time items, above-market owner compensation, and non-recurring expenses to arrive at normalized earnings that reflect sustainable performance.
💡 Document every normalization adjustment with a brief explanation — unexplained adjustments are the most common source of valuation disputes.
6
Calculate enterprise value and apply adjustments
Run the enterprise value calculation using your selected method, then apply any control premium or minority and marketability discounts appropriate to the interest being valued. Show each step numerically.
💡 Reference published discount studies (e.g., Duff & Phelps DLOM studies) if challenged on the discount percentages you apply.
7
State the per-share conclusion
Divide the adjusted equity value by the precise number of subject shares to arrive at a per-share figure. State this number explicitly and tie it back to the total equity value and share count.
💡 Express the per-share value to two decimal places and include a sensitivity table showing how a ±1% change in the discount rate or growth rate affects the conclusion.
8
Add assumptions, limitations, and a recommendation
List all material assumptions the proposal relies on, state who may rely on it and for what purpose, and include a clear recommendation on how the parties should use the concluded value.
💡 Have the preparer sign and date the final section — an unsigned proposal carries less weight in a negotiation or dispute.
