When Is a Valuation “Good Enough”? A Practitioner’s Perspective

Valuation is often spoken about as if it were an exact science. In reality, it is a structured exercise in judgment.

After years of working with founders, investors, boards, and acquirers, one of the most important — and least discussed — questions is not what a company is worth, but when a valuation is good enough.

Precision Is Comforting, But Rarely Honest

There is a natural temptation to chase precision. A single number feels reassuring. It suggests certainty in an uncertain world.

But experienced practitioners know that valuation outcomes are better thought of as ranges, not points. Small changes in assumptions — growth persistence, reinvestment efficiency, risk premia — can materially alter outcomes, even when the underlying business remains the same.

A valuation that pretends otherwise may look confident, but it is often fragile.

“Good Enough” Depends on the Decision at Hand

A valuation does not exist in a vacuum. Its usefulness depends entirely on the decision it is meant to inform.

Is the objective to:

• Raise capital without excessive dilution?

• Bring in a strategic investor?

• Support internal capital allocation?

• Negotiate an acquisition or exit?

A valuation that is “good enough” for internal planning may be insufficient for external fundraising. Conversely, a valuation built to satisfy investor scrutiny may be unnecessarily complex for operational decision-making.

Problems arise when valuation outputs are misused outside their intended context.

Alignment Matters More Than Headline Numbers

In practice, disagreements over valuation are rarely just about numbers. They are about expectations, risk tolerance, and alignment.

Founders often anchor on upside. Investors focus on downside protection. Neither is wrong — but when a valuation attempts to please both without acknowledging this tension, it usually fails.

Some of the most successful transactions we see are not those with the highest valuations, but those where:

• Assumptions are clearly understood by all parties

• Risks are openly discussed rather than minimized

• Mechanisms like earn-outs, ratchets, or structured equity bridge differences

In these cases, “good enough” means credible and aligned, not aggressive.

The Hidden Cost of Overreaching

An inflated valuation can feel like a victory in the short term, but it often carries long-term consequences.

It can:

1. Constrain future fundraising flexibility

2. Increase performance pressure at the wrong time

3. Create misalignment between investors and management

4. Complicate exits that would otherwise be attractive

A valuation that the business can grow into is often far more valuable than one that must be defended.

Judgment Over Theater

The most credible valuation discussions are those where uncertainty is acknowledged rather than disguised. Investors tend to trust practitioners who are comfortable saying, “Here’s what we know, here’s what we don’t, and here’s how sensitive the outcome is to each.”

In that sense, a valuation is “good enough” when:

• It supports a real decision

• It reflects the underlying economics of the business

• It survives reasonable challenge

• It does not rely on optimism to remain valid

Valuation is not about being right. It is about being useful under uncertainty. When that bar is met, the number is usually good enough.