Most owners do not know what their business is truly worth, yet that number drives buy-sell funding, key-person coverage, estate-tax exposure, and how much you need from a sale to retire. After the 2024 Connelly decision, a current, defensible valuation matters more than ever. An informal valuation is a low-cost starting point before a formal appraisal.
Is this a fit for you?
Who This Is For
- You own a business and have never had it formally valued, or the last valuation is several years old
- You have a buy-sell agreement and want to confirm the funding still matches today's value
- Your ownership stake is a large share of your family's net worth
- Your estate may owe federal or state estate tax and the business is your largest illiquid asset
- You are thinking about a sale or succession in the next five to ten years and need a target number
Who This Is Not For
- You need a certified, court-ready appraisal today, which requires a qualified appraiser rather than an informal review
- You have a recent formal valuation from a credentialed appraiser and your situation has not changed
- You are a passive minority investor with no buy-sell or key-person exposure
- Your business is pre-revenue with no meaningful enterprise value to protect
- You are looking for investment or portfolio management advice rather than protection planning
How do the options compare?
| Why value matters | What it affects | Risk if stale |
|---|---|---|
| Buy-sell sizing | How much buy-sell funding, often life insurance, you need in place | Coverage falls short of the real price and heirs are underpaid or the deal stalls |
| Key-person coverage | The size of key-person life insurance the business should carry | The company is under-protected against the true cost of losing that person |
| Estate-tax liquidity | How much liquidity heirs need to pay estate tax without a forced sale | An outdated value understates the tax bill and leaves a liquidity gap |
| Connelly compliance | Whether your buy-sell structure and value still hold up after the 2024 ruling | An agreement written before 2024 may no longer produce the tax result you expected |
| Retirement and exit planning | How much you must net from a sale to retire on your terms | You plan around a number that is wrong and discover the gap too late |
What are the risks, costs, and alternatives?
An informal review is a starting point, not a formal appraisal
The review Living Prepared offers is an informal, educational estimate meant to frame your protection and planning needs. It is not a certified business appraisal. A formal valuation for tax filings, litigation, or a transaction should be performed by a qualified, credentialed appraiser. Use the informal number to size the conversation, then engage an appraiser when a defensible figure is required.
Business values change, so a number ages quickly
A valuation reflects a moment in time. Revenue, margins, customer concentration, industry multiples, and the broader market all move. A figure that was reasonable three years ago can be well off today. Owners who revisit value every year or two, and after any major event, are far less likely to be caught with mismatched coverage or an outdated plan.
After Connelly, structure matters as much as the number
In Connelly v. United States (2024), the Supreme Court held that life insurance proceeds a company receives to fund a stock redemption can increase the company's value for estate-tax purposes, without an offsetting liability for the buyback obligation. The dollar amount is only part of the picture. How the buy-sell is structured, redemption versus cross-purchase, can change the estate-tax result. Have both the value and the structure reviewed.
Coordinate with your attorney and tax firm
A valuation touches legal documents and tax positions, so it should not sit in isolation. Any changes to a buy-sell agreement, an estate plan, or an insurance program are designed to work best when your attorney and tax firm are part of the conversation. Living Prepared can help frame the insurance and liquidity questions, then coordinate with your existing advisers so the pieces fit together.
What does this look like in practice?
Fairchild Manufacturing: A Buy-Sell Gap (Illustrative)
Illustrative example: not an actual client.
Edith and Clifford co-own Fairchild Manufacturing, a fabrication business they built over eighteen years. When they signed their buy-sell agreement, the company was worth about $4 million, and each funded a $2 million life insurance policy to buy out the other's half at death.
Six years later, the business has grown. An informal review suggests the company is now worth roughly $9 million, so each 50% stake is closer to $4.5 million. The existing $2 million policies would cover less than half of what a surviving owner would owe the deceased owner's family.
There is a second issue. Their agreement is structured as a company redemption. After Connelly v. United States, the insurance the company holds to fund that redemption may be counted in the value of the business for estate-tax purposes, which could raise the estate-tax exposure beyond what they planned for.
The informal valuation did not settle the price or produce a certified figure. What it did was surface two gaps, an underfunded buy-sell and a post-Connelly structure question, early enough for Edith and Clifford to bring in a qualified appraiser, their attorney, and their tax firm before either problem became a crisis.
Illustrative scenario for educational purposes. Names, figures, and outcomes are illustrative and vary by individual circumstances and current law.
Common Questions
Why does my business valuation matter for insurance and estate planning?
Your business value drives several protection decisions: how much buy-sell funding you need, how much key-person life insurance to carry, how much liquidity your heirs need to cover estate tax, and how much you must net from a sale to retire. If the value is outdated, each of those numbers is likely wrong.
What is the difference between an informal and a formal business valuation?
An informal valuation is a low-cost, educational estimate used to frame planning and protection needs. A formal valuation is a certified appraisal prepared by a qualified, credentialed appraiser for tax filings, litigation, or a transaction. Living Prepared offers an informal starting-point review, not a formal appraisal.
How did the Connelly decision change business valuation for owners?
In Connelly v. United States (2024), the Supreme Court held that life insurance a company receives to fund a stock redemption can increase the company's value for estate-tax purposes, without an offsetting liability for the redemption obligation. That can raise estate-tax exposure and makes both a current value and the buy-sell structure worth reviewing.
Related Questions
Get an Informal Business Valuation
Request a no-cost, informal business valuation and planning report. We frame what your business may be worth, where your buy-sell and key-person coverage stand, and what to review with a qualified appraiser and your tax firm. It is educational, not a certified appraisal.
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Living Prepared, LLC is an affiliate of Whitwell & Co., LLC, an SEC-registered investment advisory firm. Insurance and annuity products are offered through licensed insurance professionals. See our Disclosures.