Turbulent economic conditions of recent months have underscored the significance of the date of a business valuation. A valuation indicates the value of a business or equity interest in a business at a specific date. The farther you get from the valuation date, the less reliable the report becomes as an indicator of current value.

Sometimes changes can be very abrupt. Volatile economic consequences of the Sept. 11 terrorist attacks, for example, might well have made a Sept.10 valuation report obsolete as soon as Sept.12. Even when events are less dramatic, a rapidly declining or expanding economic cycle can lead to changes in the value of a business. Sometimes, a boom-and-bust sequence limited to a defined economic segment can have wide-ranging impact on business values, even outside the segment experiencing the frenzied fluctuation. An example is the effect on the wider economy of the changing fortunes of dot-com enterprises over the last few years. And long-term changes that lead to the demise of products like typewriters, vacuum tubes, or vinyl records have an impact on values of companies in these industries over a sometimes extended transitional period before the total collapse of market demand.

Even without such visible business disruptions and shifts, the date of a valuation report is critical. Ordinary business activities can have a significant impact on the value of a company. For example, a company’s value might grow or drop significantly because of a change in management, the company’s competitive situation, the marketability of one of its products, or local or general economic activity.