Ever feel like figuring out your company’s value is more alchemy than accounting? You’re not alone. In this blog, we’ll dive deeper into the practical ways to assess what your business is really worth—without the jargon, the fluff, or the headaches.
Whether you’re thinking of selling, bringing in new investors, or simply curious, understanding valuation is key to making confident, informed decisions.
Why Valuations Matter
Let’s start with the “why.” In Part 1, we covered the common reasons people seek a business valuation—selling up, going through a divorce, planning a management buy-in, or just wanting a clearer picture of where they stand. If you missed that, it’s worth a quick look.
But now it’s time to get a bit more technical. Don’t worry—we’ll break it all down simply.
The Power of EBITDA (And What It Really Means)
One of the most common—and arguably most useful—valuation tools is EBITDA, which stands for:
Earnings
Before
Interest
Taxes
Depreciation
Amortisation
Sounds a bit much? Here’s the simple version:
👉 Take your business’s net profit, then add back interest, tax, depreciation, and amortisation. That gives you a clearer idea of what the business is earning, without the impact of financial structure or accounting quirks.
Once you’ve got that number, you multiply it by a figure known as a ‘multiple.’ A common rule of thumb? Three times EBITDA. But let’s be honest—that’s not one-size-fits-all.
Factors that Influence the Multiple:
Industry norms – Different sectors have different benchmarks.
Company size – Larger businesses often fetch higher multiples.
Operational strength – If your business runs like a well-oiled machine without you, that adds serious value.
Financial consistency – A sudden spike in profits might raise eyebrows, especially if you’re selling. Always look at the average over time.
🔍 Tip: When using EBITDA, always check for anomalies. If profits look unusually high in the final year before sale, it’s fair to ask, “What changed?” A savvy buyer definitely will.
The Balance Sheet Valuation: Proceed with Caution
Now, there’s another method—the balance sheet valuation. This one’s as simple as it gets:
Assets – Liabilities = Net Worth
Sounds tidy, right? But here’s the catch…
If your business is trading well and has strong goodwill (think reputation, loyal customers, brand value), the balance sheet doesn’t account for it. So you might be leaving serious money on the table.
This method tends to be used in:
Liquidation scenarios – Where the company is winding down and assets are being distributed.
Property companies – Where the assets (i.e., buildings) hold the majority of the company’s value.
🛑 For active businesses, balance sheet valuations are rarely the full picture.
The Real Takeaway: Get Expert Advice
It’s tempting to throw together a few numbers and call it a day. But valuations are part science, part art—and context matters.
A valuation expert (yep, like us!) can help you avoid common traps, access up-to-date market data, and ensure your figures reflect reality—not just what Dave at the pub reckons your business is worth.
And remember, data is only as good as the story behind it.
Want More Support?
If this blog has left you with questions—or you’re ready to dig deeper—we’re here to help. You can book a free discovery call, and we’ll walk you through your options. No pushy sales talk. Just honest, expert advice.
