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A company’s future is uncertain, but the money changing hands today is real. That is why transactions are a major reason to value a private business. Someone is buying ownership, providing financing, selling assets, or accepting shares as compensation. Each has skin in the game, but each needs the valuation to answer a different question.

1. Venture capital: How much ownership buys another round of funding? Early-stage companies often raise equity in successive rounds tied to milestones. The business develops, investors reassess it, and another round follows. Future cash flows are often too uncertain to support much precision, so less formal valuations become a basis for negotiation. The map is not the territory: putting a number on a company’s future does not make that future more predictable.

2. Private equity: what can these owners change before they sell? Growth equity funds usually buy minority stakes in businesses with the potential to expand rapidly or renew their growth. Leveraged buyout firms acquire majority control and seek to improve operations and the balance sheet. The distinction matters: growth investors generally back the people steering the business, while buyout investors acquire the authority to change direction. Both aim to exit at a higher valuation. VC and growth equity typically involve minority ownership, but they target different stages of development.

3. Debt financing: Can the business carry the debt? Borrowers and lenders may use valuations to assess whether operating cash flows can repay existing borrowing or support additional debt. That new borrowing might fund restructuring, expansion, or an acquisition. Here, the question becomes concrete: how much financial weight can the business carry before its obligations exceed its capacity to pay? An attractive growth story does not make a repayment.

4. An IPO: what will public investors pay? When a private company approaches the public equity market, the issuer, prospective investors, and investment banking advisers typically prepare valuations. The company might be outgrowing founder and VC financing. It might be a division separated from an existing public company through a divestiture or spin-off. Or it might be a formerly public business returning after restructuring under private ownership. Different histories, the same need to assess the equity being offered to public investors.

5. Acquisitions and divestitures: what is the business worth to buy or sell? Developing and mature companies often buy or sell entire businesses, divisions, or business lines. Management on either side may perform valuations, with investment banking advisers typically involved in larger deals. Buyer and seller are examining the same business from opposite sides of the negotiating table. Agreement on the price does not require agreement on every assumption behind it.

6. Bankruptcy: is the business worth more operating or being dismantled? Under bankruptcy protection, company and asset valuations help compare continued operation with liquidation. A viable business may have a capital structure it cannot support. In that case, valuation can inform a restructuring of excessive debt. The uncomfortable distinction is between a business that cannot work and a financing arrangement that cannot work. They are not the same failure.

7. Share-based compensation: what are employees receiving? Stock options, restricted shares, and employee stock ownership plans are transactions between a company and its employees. US employee stock ownership plans have equivalents elsewhere, and share-based payments often create accounting and tax consequences for both parties. Private-company option grants frequently require valuations. Calling something compensation does not settle how much it is worth.

The number matters because someone has to live with the terms.

Sometimes a business needs a valuation even when nobody wants to buy it. The accounts need updating, a tax obligation needs calculating, or two people have decided their disagreement deserves lawyers.

Compliance valuations support financial and tax reporting required by law or regulation. The question is how to produce a defensible number under the relevant rules, however inconvenient that number turns out to be.

For financial reporting, investment firms need ongoing valuations to measure and report performance. Public and private companies that have acquired businesses also need valuations for impairment testing: checking whether the amount recorded in the accounts is still supportable. Yesterday’s acquisition enthusiasm doesn’t get a lifetime lease on the balance sheet. Divisions of public companies may also be valued using private company valuation techniques.

For tax reporting, valuations may be needed for corporate restructurings, transfer pricing, and property taxes. Transfer pricing concerns transactions between related businesses. Keeping a transaction inside the corporate family doesn’t make the price nobody else’s business. Individuals may also need private company valuations for estate and gift taxes, depending on the jurisdiction. A gift can arrive without a price tag and still require a valuation.

Litigation valuations address disputes involving damages, lost profits, shareholders, or divorce. They may concern public or private companies, or disagreements between shareholders that leave the company itself unaffected. The business can keep doing business while its owners argue about how much of it belongs to whom. Here, a valuation needs reasoning that can survive questioning by someone professionally employed to dislike it.

These uses create three distinct practice areas: transactions, compliance, and litigation. Transaction work often involves investment bankers. Compliance requires detailed knowledge of accounting or tax rules. Litigation requires the ability to explain and defend a valuation in a legal setting. Knowing how to build the spreadsheet is only part of knowing how to do the job.

Finally, “value” needs a definition before it needs a calculation. A valuation prepared under an applicable reporting or tax standard may differ from the business’s investment value to a particular buyer. That buyer might pay more because combining the businesses would reduce costs or create other benefits. Those synergies have value to that buyer, but they aren’t automatically available to everyone else.

Before arguing about what a company is worth, establish who it is worth that much to, and why.