What is the difference between a business valuation and an appraisal?
The short answer
A valuation is a formal opinion of value prepared by a qualified valuer to a documented methodology, with assumptions disclosed and a signed declaration. An appraisal is usually a broker’s marketing estimate of a likely selling price, prepared free, by someone paid on the sale.
Who prepares it, and who pays them
A valuation is prepared by a valuer whose fee is fixed and unrelated to the outcome. An appraisal is typically prepared by a business broker whose income depends on winning the listing and completing the sale. Both can be honest and competent; only one is structurally independent, and that difference is what a court, a lender or the ATO is looking at.
What is inside the document
A valuation states the standard of value, the valuation date, the methodology and why it was chosen, every assumption and limitation, the evidence relied on, and a signed declaration with the valuer’s credentials. An appraisal is generally a price estimate with a rationale. The difference is not length; it is whether the reasoning can be tested.
They answer different questions
An appraisal asks: what would this business likely list and sell for in the current market? A valuation asks: what is the fair market value of this interest, on a defined basis, at a defined date? For selling a business, both are useful. For tax, court, finance, probate or a shareholder exit, only one is.
Where each belongs
Use an appraisal to test the market and to choose a broker. Use a valuation when the number has to survive scrutiny — from the ATO, a bank’s credit team, an opposing expert, a beneficiary or a judge. Many sellers sensibly get both, and knowing the gap between them is itself useful information.
The numbers
Valuation and appraisal, compared
The comparison that matters is not accuracy — it is what each document can be relied on for.
Scroll the table sideways →
| Attribute | Formal valuation | Broker appraisal |
|---|---|---|
| Prepared by | Certified Practising Valuer | Business broker or agent |
| Cost | Fixed fee, quoted in writing | Usually free |
| Independence | Fee unrelated to outcome | Income depends on the listing and sale |
| Methodology | Stated, with cross-check and evidence | Often a market estimate and comparables |
| Accepted by ATO, courts, lenders | Yes, where properly prepared | Generally not |
| Best used for | Tax, court, finance, disputes, estates | Testing the market and choosing a broker |
This is not a criticism of brokers, many of whom know their markets extremely well. It is a statement about what each document is designed to do and what it can therefore be relied on for.
Caveats
When an appraisal is the right tool
There are cases where a valuation is more than the question requires.
Who answered this
Prepared by the valuation team at Business Valuations Brisbane, the business valuation division of Asset Valuations Group. Every report we issue is signed by a Certified Practising Valuer of the Australian Valuers Institute. General information only — not advice on your specific circumstances.
- You are testing the market casually If you are years from selling and just want a sense of the market, an appraisal costs nothing and gives you a starting point.
- You are choosing between brokers Comparing appraisals tells you as much about the brokers as about the business, which is genuinely useful when you are appointing one.
- The business is small and simple For a very small owner-operated business with a straightforward asset base, a formal valuation may be more than the decision warrants.
- But not when someone else must accept it The moment a third party — the ATO, a court, a lender, a co-owner, a beneficiary — has to rely on the number, an appraisal will not do the job.
Reviewed by a Certified Practising Valuer
Reviewed by Jarrad Khoury, Director and Head of Valuations — Registered Valuer (QLD, Not Limited), Licensed Valuer (WA, Not Limited), CPV and CBV. Published by Business Valuations Brisbane, the business valuation division of Asset Valuations Group.
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