The Placeholder Problem: Guessing Your Client’s Business Value is Undermining Your Planning

You build comprehensive financial plans for your business owner clients, stress-testing retirement scenarios, modeling tax strategies, and calculating insurance needs.

But when you get to "business value," most advisors are entering a number they know isn't reliable.

Maybe it's based on a multiple from a conversation three years ago, or what the owner thinks the business could sell for. Maybe it's a rough calculation you ran on the back of a napkin.

Whatever the source, it's a placeholder that’s undermining every projection that depends on it. As clients turn to their advisors for more comprehensive and tailored services, clear business valuation estimates are critical to planning with owners.

The Cost of Guessing Business Value

Most business owners can tell you their monthly cash flow and what their business generates in revenue, but 98% don't know what their business is actually worth, despite how important their business is in their financial lives.

That disconnect can derail your planning work:

• Retirement projections assume a specific exit value 
• Life insurance policies are calculated based on the business's worth
• Estate plans depend on an accurate valuation for tax purposes

Every one of these critical planning elements relies on a number that most of your business owner clients can't substantiate.

Why Placeholders Feel Practical

With certified business valuations services starting at around $5,000 (running as high as $25,000 or more for complex businesses) and taking four to six weeks to complete, advisors often struggle to justify the time and expense to business owner clients, especially if they aren’t actively planning to sell.

Using a placeholder number, like the owner’s best guess, a rough industry multiple, or an old valuation, feels like the practical alternative. But when that placeholder becomes the foundation for insurance recommendations, retirement projections, and estate planning decisions, it creates a compounding problem.

With new technology providing data-driven valuation estimates in minutes, advisors can replace placeholder values and reserve certified valuation services for the key use cases that require them. 

Valuation Software: The Modern Middle Ground

Certified valuations are necessary in very specific cases like gifting, estate taxes, ESOPs, and others However, most planning situations don't require that level of rigor.

Your clients are trying to figure out if they have enough wealth in their business to retire comfortably, whether their current life insurance is sufficient, and what their business needs to be worth to fund their children’s education and their own retirement.

These questions require better estimates than a placeholder, but they don't require a $15,000 certified valuation.

Valuation software offers a compelling middle ground. Modern platforms can generate defensible valuation estimates using actual business data, incorporating industry benchmarks, applying appropriate multiples, and accounting for company-specific factors.

The output will be substantially more reliable than a placeholder at a fraction of the cost of a formal valuation and in hours, not weeks. 

Plus, the valuation can be continuously updated as business conditions change, offering advisors new engagement opportunities with their clients throughout the year.

The New Planning Conversation

With a real estimate rather than a placeholder business valuation, you can have more meaningful financial planning discussions. 

For example, you can tell your client, "Based on your goals for retirement, your kids' education, and the lifestyle you want to maintain, your business would need to be worth $8 million when you exit. Right now, our estimate puts it at $4.5 million. That's a $3.5 million gap."

Now you're helping them understand what drives business value. What would increase the multiple? How can the business become less dependent on the owner? What systems need to be in place? How does timing affect the outcome?

This type of wealth gap analysis gives you a framework for ongoing planning. Every quarter, you can revisit the valuation, track progress, and adjust strategies. 

Making Business Valuation Part of Your Planning Process

You’re already serving business owner clients, but if you’re using placeholder valuations in their financial plans, you may be undermining your own process.

Valuation software helps you bring more rigor and sophistication to business owner planning without the cost and delay of certified valuations. Using modern technology, you can capture real business data, generate defensible estimates, and help your clients understand what their most important asset is worth. 

Rather than a guess, valuation becomes an anchor for planning conversations, enabling you to more effectively identify gaps, track progress, and make recommendations that increase your own value to your clients.

Wondering what this could look like in your practice? Download a sample business insights report from RISR to see the metrics and talking points you need to offer more comprehensive financial planning guidance.