A “valuation process” buy-sell agreement is an agreement that stipulates the process for determining a value of the business. This differs from a fixed price agreement, which states the dollar value of the business right in the agreement; a formula agreement, which states a formula for valuing the business (X times annual sales, for example); and a shotgun agreement, where one person has a right or obligation to buy (or sell) at a some price, and the other party has the right or obligation to sell (or buy) at that same price.
Valuation process buy-sell agreements outline valuation processes through which future transactions will be priced. In nearly all cases, process agreements call upon the use of one or more business appraisers in the process of determining the price at which a future transaction will occur.
There are six important elements relating to valuation in a well-written buy-sell agreement.