Valuation is the process of determining how much something is worth, especially a business or investment. When entrepreneurs appear on TV shows like Shark Tank, investors perform a valuation to decide if the company is really worth what the owner claims. If someone says their lemonade stand business is worth $100,000, an investor might do a valuation and discover it's actually worth much less (or perhaps even more!).

Businesses get valued based on several factors: how much money they make, what they own, how fast they're growing, and what similar companies have sold for. A profitable bakery with loyal customers and modern equipment will have a higher valuation than one barely breaking even with old ovens. Tech startups sometimes have surprisingly high valuations even before making much profit, because investors believe they'll grow enormously.

When someone performs a valuation, they're trying to put a specific number on how much something is worth. Professional valuators look at financial records, assets, and market conditions to determine a fair price. Parents do informal valuations too: when you want to sell your old bicycle, they might help you figure out a reasonable asking price based on its age and condition.