Ask a founder what their business is worth and you will hear a number with a story attached. It is what they turned down once, or what a friend's similar company sold for, or what it will be worth after the next launch. It is a feeling, rounded up.

Now imagine the week after you die. Your executor sits across from an attorney who asks one question: what was it worth on the date of death? Your family doesn't have your story. They have a bank statement, a login they may not be able to use, and a form that wants a figure.

That figure is not a formality. It decides how much tax is owed, what your family's cost basis is when they sell, and whether the business can be sold at all. Most solo founders have never written it down.

Two values, and only one counts

There is the value to you: the income you draw, the identity, the years. And there is the value to the law, which is narrower and colder.

For tax purposes, the standard is fair market value. The IRS's long-standing guidance, Revenue Ruling 59-60, describes it as the price at which property would change hands between a willing buyer and a willing seller, neither being under compulsion to act, both having reasonable knowledge of the relevant facts. Notice who is missing from that sentence: you. Your attachment, your plans, and your sense of what the business could become are not part of the definition.

The same ruling lists factors an appraiser weighs: the nature and history of the business, the economic outlook, book value and financial condition, earning capacity, dividend-paying capacity, whether there is goodwill, prior sales of the stock, and the market price of comparable companies. Earnings and comparables do most of the work.

Why a solo business is hard to value

A company with a management team has value that outlives any one person. A solo business often does not. When the person who is the product, the support desk, and the only administrator dies, the cash flow a buyer would be paying for may be the very thing that just ended.

Appraisers have a concept for this: the key person discount. When a business depends heavily on one individual, the value is reduced to reflect the risk that revenue leaves with them. For a solo founder, that discount can be steep, because the key person is the whole company.

This is a point worth sitting with. The business you describe as worth a great deal may be worth much less on the day you die than on the day before. Recurring revenue with documented systems, clean books, and transferable accounts will hold its value. A business whose knowledge sits in one head will not.

It is also why valuation and continuity are the same problem. Every hour you spend making the business understandable to a stranger raises the number your family can defend.

The two ways a wrong number hurts

When the figure is too high, the estate may report more value than it can actually realize, and any estate tax is computed on it. For 2026, the federal estate tax exemption is $15 million per person, so many solo founders will not owe federal estate tax at all. But some states levy their own estate or inheritance taxes with much lower thresholds, so a number that is irrelevant federally can still matter locally. Check your state; the rules vary widely.

When the figure is too low, the problem arrives later. Under the stepped-up basis rule (Internal Revenue Code section 1014), assets that pass at death generally take a new tax basis equal to their fair market value on the date of death. If your family sells the business shortly after, a well-supported date-of-death value can shrink the taxable gain to only what the business gained after you died. A weak or missing valuation leaves them arguing with an auditor about what the starting point was.

So the ideal is not high or low. It is defensible. A qualified, documented appraisal as of the date of death turns an argument into a record.

There is a related option worth knowing exists: an executor may elect an alternate valuation date six months after death, but only in cases where doing so reduces both the gross estate and the estate tax due. It is a technical choice made with a professional, not a plan, but it shows that the date-of-death number is a decision someone has to make.

What an appraiser will ask for

You can make the eventual appraisal faster, cheaper, and more accurate by assembling the inputs now. Appraisers of small businesses typically want several years of financial statements and tax returns, a breakdown of revenue by customer or product, details on recurring versus one-off income, a list of contracts and obligations, and a description of what the owner personally does.

That last item is the one founders skip. If the appraiser cannot tell which tasks depend on you, they will assume all of them do, and the discount grows.

Your next moves

  • Write down your own number, then stress it. Take twenty minutes and put a figure on the business. Underneath it, answer honestly: what would a stranger pay if I vanished tomorrow? The gap between the two lines is your risk.
  • Pull three years of financials into one folder. Profit and loss statements, tax returns, and a revenue-by-customer summary. Name the folder plainly and tell your executor where it is.
  • Separate recurring revenue from revenue that depends on you. Mark each stream as subscription, contract, or personal effort. This is the single most useful page an appraiser could receive.
  • List the three tasks only you can do, and document one. Pick the most valuable and write a short, step-by-step note so someone else could perform it.
  • Look up your state's estate and inheritance tax threshold. Five minutes with your state revenue department's site tells you whether the valuation question carries real tax weight for you.
  • Ask an estate attorney or CPA who values the business at death. Find out who would commission the appraisal and what they would need. Write the answer into your instructions.

The kindest version of the number

There is something quietly tender about this exercise. A valuation sounds like arithmetic, but in practice it answers a human question: how much of what I built can survive me, and how much of it was only me?

Most founders discover the answer is uncomfortable. The parts that survive are the parts they wrote down, systematized, and made legible to someone else. The parts that do not are the parts that lived in memory and habit. Closing that gap is not morbid. It is the most generous work a solo owner can do, because it turns a family's inheritance from a mystery into something they can actually sell, keep, or close with a clear head.

Heirloom was built for this gap. It keeps your accounts, documents, beneficiaries, and handoff instructions in one place, so the records an appraiser, an attorney, and an executor will all ask for already exist and your family can find them. If you'd like to see how that looks, you can explore it at heirloom.lumenlabs.works. Either way, write down your number today and test it against a stranger's eyes. Your family will be asked for it whether you do or not.