What to Include in a Business Valuation Scope

A business valuation scope should define five things before detailed work begins: the decision being supported, the business or ownership interest and valuation date, the intended audience and use, the evidence available, and the agreed deliverable and limitations. Exact requirements depend on the purpose and facts; this checklist supports preparation, not a valuation method or opinion.

Choose the route first: fundraising work usually centres on the funding need, use of funds and forecast evidence; a business sale or acquisition needs transaction structure, cash, debt and working-capital information; a shareholder or strategic-planning exercise may require a different date, audience and level of analysis. For a cross-border assignment, identify every country and entity involved so the scope can be tailored.

Start with a short scope brief: state the purpose, business or interest being considered, valuation date, audience, deadline, sector, available financial history and whether forecasts or transaction terms already exist. Request a valuation consultation before sending files, and agree a secure document-sharing method before providing accounts, contracts, identification or confidential transaction material.

1. Define the valuation decision and scope

• Purpose: fundraising, sale, acquisition, merger, shareholder transaction, strategic planning or another specified decision.
• Audience: identify who will receive or rely on the work, such as management, shareholders, a buyer, lender or prospective investor.
• Subject and date: state the entity or ownership interest being considered and the intended valuation date.
• Timetable: record the decision date, transaction milestones and any existing offer or term sheet.
• Deliverable: describe what you expect to receive and how you expect to use it. Scope and permitted use must be agreed before work begins.

2. Organise financial history

• Signed annual accounts and corporation tax computations available for recent periods.
• Current management accounts, with the reporting date and a reconciliation to the accounting system.
• Monthly revenue and gross-margin analysis, including major products, services, customers or contracts where relevant.
• Payroll and headcount information, including owners, directors and roles that may need market-cost consideration.
• A schedule of significant, unusual or non-recurring income and costs, supported by invoices, contracts or explanations.
• Details of accounting-policy changes, prior-period adjustments and known gaps in the records.

3. Explain cash, debt and working capital

• Bank balances and reconciliations at the selected reporting date.
• Borrowings, leases, shareholder or director balances, security and repayment terms.
• Trade receivables and payables ageing, including disputed, overdue or connected-party balances.
• Inventory records and the basis used to identify obsolete or slow-moving items.
• Normal working-capital needs, seasonality and any unusual timing around the valuation date.
• Commitments, guarantees, contingent liabilities or other items that may affect a transaction discussion.

4. Make the forecast traceable

• An integrated profit-and-loss, balance-sheet and cash-flow forecast where the assignment requires forward-looking analysis.
• Separate volume, price, customer, staffing and cost assumptions instead of unexplained growth percentages.
• A bridge from recent actual performance to the first forecast period.
• Base, downside and other decision-relevant scenarios, with changes clearly labelled.
• For fundraising, the amount sought, proposed use of funds, timing and milestones the funding is intended to support.
• Evidence for major assumptions, such as signed contracts, customer pipeline stages, capacity plans or supplier quotations.

A forecast supplied by management remains management information. Preparing or reviewing a model does not turn an uncertain forecast into a guaranteed outcome.

5. Map ownership and transaction terms

• Current company structure, share classes, shareholders and percentage ownership.
• Options, warrants, convertible instruments, shareholder agreements and recent share transactions.
• Connected companies, intellectual property ownership and material intra-group arrangements.
• Any proposed transaction structure, headline price, earn-out, retention, completion accounts or locked-box terms under discussion.
• Professional advisers already involved and the questions assigned to each adviser.

6. Add commercial and operational evidence

• Description of the business model, customer problem, routes to market and principal revenue streams.
• Customer and supplier concentration, renewal patterns, contract terms and known dependencies.
• Key people, responsibilities, succession risks and recruitment plans.
• Principal systems, licences, regulatory matters and intellectual property relevant to operations.
• Known disputes, claims, compliance issues or other matters that could affect the business or the intended transaction.

7. Run a consistency check

• Use the same historical figures across the valuation brief, financial model, pitch deck and data room—or explain every difference.
• Label actual, budget, forecast and illustrative information clearly.
• Reconcile headline revenue, EBITDA, cash, debt and funding requirements to supporting schedules.
• Keep a version log showing who changed each document and when.
• List unanswered questions rather than filling gaps with assumptions that have not been approved.

What to send for the first scope discussion

Start with a one-page summary covering the purpose, subject, valuation date, audience, deadline, size and sector of the business, available financial history and whether forecasts already exist. Illustrative example — fundraising: “UK software company; fundraising decision; 31 December 2026 valuation date; management and prospective investors as the intended audience; three years of accounts, current management accounts and a three-year forecast available; £750,000 sought for recruitment and product development; decision required by 15 January 2027.” KBA can then identify the information needed for an appropriate engagement rather than requesting a full data room immediately.

For related preparation, read KBA’s guides to enterprise value versus equity value, evidence-backed EBITDA adjustments and reconciling investor materials. The free business-sale value bridge can organise an illustrative bridge; it does not determine what a business is worth.

For background on cash, debt, working-capital adjustments and transaction terms, see ICAEW’s Completion Mechanisms guideline. It explains why agreed definitions matter in a transaction; this checklist does not determine those adjustments.

Explore KBA’s business valuation and fundraising services, or request a valuation consultation to discuss the decision, available information and an appropriate scope. No valuation, transaction or funding outcome is guaranteed.