Those with formula buy-sell agreements may believe that such agreements are superior to fixed price buy-sell agreements, but, as we will see, formula buy-sell agreements have their own issues. They fix a single formula today for transactions that will occur at future dates. The advantages to formula buy-sell agreements are they are initially easy to understand, they are easy to negotiate, and are typically inexpensive.

The primary disadvantage of formula buy-sell agreements is that no formula selected at a given time can provide reasonable and realistic business valuations over time. This is true because of the myriad changes that occur within individual companies, local or regional economies, the national economy, and within industries. Also, formulas written by attorneys are seldom clearly presented in the context of buy‑sell agreements. There seems to be a tendency to put formulas in ponderous paragraphs and to omit the algebraic presentation of the actual formulas. It is a good idea to be sure you know how the formula in your buy-sell agreement works and that the parties affected by the formula agree to how it is used. It is an even better idea to calculate the formula value periodically so you will know what the buy‑sell agreement price would be if a trigger event occurred. The changes you see in the price over time may cause you to reevaluate the use of the formula in your buy‑sell agreement.