Doug Roberson and his partner started thinking about selling their data communications company, Atlantic Network Systems, in 1994. "Because we wanted the best outcome and knew very little about the mergers-and-acquisitions market, we decided to get as prepared as possible," explains Roberson.

The partners' instrument of choice? A corporate valuation, which they hired a large mergers-and-acquisitions firm to perform at a cost of about $15,000. "That turned out to be one of the smartest things we could have done," Roberson recalls. "We received a 25-page report that allowed us to get a completely different perspective on our company." The valuation helped him and his partner pinpoint issues that might trouble an independent outsider, such as the company's reliance both on certain key employees and on major customers. "What it did was allow us to prepare ourselves to respond to worries on the part of a prospective buyer," Roberson explains. "It helped us become stronger negotiators."

Here's the happy ending: One year ago Roberson and his partner merged their $18 million Raleigh, N.C., company with a bigger company. In return for their stock in Atlantic Network Systems, the partners received $5.7 million worth of the larger company's stock, as well as five-year management contracts. "That valuation was worth every penny for the added insights it gave us," Roberson concludes.

There may be no business document as maligned or misunderstood as the corporate valuation, also known as a business appraisal. Although they're especially useful for business owners contemplating the sale of their companies, valuations are seldom commissioned by sellers at all--since most are convinced that nobody knows their companies' value better than they do. And while valuations can also have an enormous impact on strategic planning, they're typically overlooked there, too. Most business owners choose to pay for a formal valuation only when they absolutely must--usually when a financing or other kind of transaction requires one.

So here's a wake-up call. Pricey though they may be, valuations can and should be used at key stages in any growth company's development. "The thing to keep in mind is that when you own a private company, no one can look up its value in a newspaper. So when circumstances require that kind of information about a private company, its owner must hire someone to perform a study of its value that is logical and defensible," explains Thomas Giordano, director of valuation services for the accounting firm Goldstein Golub Kessler & Co., in New York City.