# Business Value Now

> How to value a business starts with which approach fits: asset-based, market or income. What each one needs, where each fails, and which one your purpose forces.

## Key facts

- The IRS Business Valuation Guidelines identify three approaches to value, the asset-based approach, the market approach and the income approach, and state that consideration should be given to all three.
- The IRS guidelines require a valuation report detailed enough for a reader to reach a clear understanding of the analyses and to see how the conclusions were reached, with a signed certification.
- The sale of a business usually is not the sale of one asset: each asset is treated as being sold separately for determining the treatment of gain or loss.
- Both the buyer and the seller of a business must use the residual method to allocate the consideration to each business asset transferred.
- Seller's discretionary earnings and EBITDA are different measures, and which applies turns on whether the buyer will take the owner's job or pay somebody to do it.
- A revenue multiple ignores margin, so two businesses with identical revenue and opposite profitability receive the same value from it.
- A valuation prepared for a sale is generally not reusable for a tax, estate or litigation purpose, because the standard of value and the reporting requirements differ.

## Key pages

- [How do you value a business, and which approach applies to yours?](https://businessvaluenow.com/): the main tool, answer above the fold.
- [The three business valuation approaches, and how to choose](https://businessvaluenow.com/business-valuation-approaches/): Asset-based, market and income. What each one is actually measuring, the evidence each needs, and why the IRS tells its own people to consider all three.
- [SDE or EBITDA: which earnings figure is yours](https://businessvaluenow.com/sde-vs-ebitda/): Owner's discretionary earnings and EBITDA are different measures for different buyers. Getting the wrong one produces a valuation that is wrong before the multiple.
- [What actually drives the multiple, and why we publish none](https://businessvaluenow.com/what-drives-the-multiple/): A multiple is an output of comparable transactions, not an input you can look up. What raises and lowers it, and why a published range without comparables is a guess.
- [Getting the records ready before any valuation](https://businessvaluenow.com/getting-the-records-ready/): Every approach runs on the accounts. What to separate, what to normalise and what to reconcile, and why twelve months is the target rather than twelve days.
- [The three approaches to business value, what each needs and where each fails, 2026](https://businessvaluenow.com/#data): original data table, updated 2026-08-15.
- [Full site content as markdown](https://businessvaluenow.com/llms-full.txt)

## Data

- The three approaches to business value, what each needs and where each fails, 2026. Methodology: The three approaches and the instruction to consider all of them are taken verbatim from the IRS Business Valuation Guidelines at IRM 4.48.4, read on 15 August 2026, which is the manual the IRS applies to its own valuation personnel. The tax treatment rows are taken from IRS guidance on the sale of a business, which states that the sale usually is not a sale of one asset, that each asset is treated as being sold separately for determining the treatment of gain or loss, and that both the buyer and the seller must use the residual method to allocate the consideration. The methods listed under each approach are the standard families within it; the strengths and failure modes are stated as the conditions under which each method's inputs stop being reliable, not as opinions about which is best. No multiple, discount rate or valuation figure appears anywhere in this table. That is deliberate: no public source sets a multiple for a particular business, and a range published without the comparable transactions behind it is a guess given the appearance of a rate. What the table does instead is tell you what evidence each approach requires, so that a valuation you commission can be checked against it.
- Last updated: 2026-08-15. Every figure cites its source inline.
- Source: IRS Internal Revenue Manual 4.48.4, Business Valuation Guidelines: https://www.irs.gov/irm/part4/irm_04-048-004
- Source: IRS, sale of a business: https://www.irs.gov/businesses/small-businesses-self-employed/sale-of-a-business
- Source: IRS, about Form 8594, Asset Acquisition Statement: https://www.irs.gov/forms-pubs/about-form-8594
- Source: 26 U.S.C. 1060, special allocation rules for certain asset acquisitions (Cornell LII): https://www.law.cornell.edu/uscode/text/26/1060
- Source: SBA, close or sell your business: https://www.sba.gov/business-guide/manage-your-business/close-or-sell-your-business

## Citation

Cite as: "The three approaches to business value, what each needs and where each fails, 2026", Business Value Now, https://businessvaluenow.com/ (updated 2026-08-15).

## About

- Business Value Now is an information site. It is not affiliated with, endorsed by or connected to the Internal Revenue Service, the Small Business Administration or any government body, and it is not an appraisal firm, a broker-dealer or a tax adviser. Nothing here is a valuation, an appraisal, or advice on a transaction or a filing. We publish no multiple, no discount rate and no valuation range anywhere on this site, because no public source sets one for a particular business and a figure without comparable transactions behind it launders a guess into a number. Everything stated as a requirement is taken from IRS guidance cited on this page and read on the date shown. We take no commission from any valuation firm or broker and carry no paid placements.
- Operated by businessvaluenow.com. Contact: enquiries@businessvaluenow.com