Owners often hear a single rule of thumb and assume it applies to them. The real picture is more nuanced, and understanding it helps you make better decisions long before a sale.
Value usually starts with earnings
For most privately held businesses, value is based on a measure of normalized earnings, with one time and personal items adjusted out, multiplied by a figure that reflects the perceived risk and quality of those earnings. That multiple varies widely by industry, size, growth, and how dependent the business is on its owner, so a number that fits one business can be misleading for another.
What tends to raise value
- Consistent or growing earnings with clean records.
- Revenue that recurs or is under contract.
- A diversified customer base.
- A capable team and documented systems.
- Low reliance on the owner.
What tends to lower value
- Heavy dependence on the owner.
- A single large customer.
- Inconsistent or hard to verify financials.
- A declining or unpredictable trend.
Why a range, not a single number
Until a real buyer is at the table, value is best understood as a range. The range narrows as you prepare the business and as a competitive process draws out genuine interest. That is why preparation, not just a headline number, is where value is protected.
Try a Preliminary Estimate
Use this to get a rough, illustrative range with three common methods, using figures you enter. The default multiples are general starting points only, not benchmarks for your specific business. Adjust them to your situation.
Important: anything here is general and educational. It is not a valuation of your business and not financial, tax, or investment advice. A real valuation looks at your specific numbers, and we are glad to discuss a preliminary range with you.
This guide is general information, not advice specific to your business. Figures and ranges are illustrative and are not a formal valuation. For a confidential read on your own situation, book a conversation.
This calculator produces a rough, illustrative range from the figures you enter. It is not a valuation of your business, and it is not financial, tax, or investment advice.
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