Value A Company
Methodology

How we calculate your valuation range

The estimate is built on the same logic an experienced buyer applies: normalize earnings, anchor on an industry-typical multiple, then adjust for scale and quality.

The short version. We take your reported EBITDA, normalize it for a small set of buyer adjustments, multiply it by your industry’s typical range, then narrow the band based on your scale, growth, and earnings quality. Output is always a range with a midpoint — never a single number.
1

Start with EBITDA

Most established buyers anchor on EBITDA — earnings before interest, tax, depreciation, and amortization. It’s a proxy for the cash a business throws off, before financing and accounting choices blur the picture.

For owner-operated businesses below ~$1M EBITDA, buyers often look at SDE (seller’s discretionary earnings) instead. Above that, EBITDA is the convention.

2

Normalize earnings

Reported EBITDA almost never matches the number a buyer will use. We adjust for items a new owner wouldn’t carry, and for one-time events that don’t reflect ongoing operations.

Common add-backs

  • Owner compensation in excess of a market-rate replacement
  • One-time legal, consulting, or restructuring costs
  • Discretionary expenses (vehicles, travel, family on payroll)
  • Non-recurring revenue or expenses

Common deductions

  • Below-market rent paid to a related party
  • Capitalized expenses a buyer would treat as opex
  • Customer concentration penalties
  • Deferred maintenance or capex catch-up
3

Apply an industry multiple

Each industry has a typical multiple range. It reflects how cyclical the sector is, how capital-intensive the business model is, and how active the buyer pool is.

We use a current, market-informed range per industry — refreshed against transaction data so the bands don’t drift — then narrow it based on the specifics you enter.

4

Adjust for scale & quality

Two businesses with the same EBITDA in the same industry can trade at very different multiples. The factors that move you within the range — or sometimes outside it — are well understood.

Moves you up the range

  • Larger absolute EBITDA (scale premium)
  • Multi-year revenue and margin growth
  • Diversified customer base, recurring revenue
  • Management depth beyond the owner

Moves you down the range

  • Customer concentration over ~25%
  • Declining or volatile margins
  • Heavy owner-dependence
  • Deferred maintenance or capex catch-up
5

Show a range, not a number

A real offer reflects buyer-specific synergies, deal structure, and diligence findings. We show low, midpoint, and high together — and we never reduce the estimate to a single point.

What this estimate isn’t

  • Not a formal appraisal
  • Not advice to transact or hold
  • Not modeled to capture buyer-specific strategic value or deal structure
  • Not a substitute for a quality-of-earnings exercise
Estimates are directional. They do not create an advisory relationship and should not be relied on for transaction pricing.

How this content is produced

Everything on this site is written and maintained by an editorial team rather than credited to an individual author. That is a deliberate choice, not an oversight: the site is published without firm branding, so there is no personal byline to attach. We would rather say that plainly than invent one.

What we can tell you is the standard the writing is held to.

  • Claims are sourced, qualified, or cut. Anything a reader could reasonably challenge — a statistic, a claim about what buyers currently do, a statement about tax or accounting treatment — carries a link to where it came from, is explicitly framed as our own judgement, or does not appear.
  • Sources are ranked, and we prefer the primary one. Regulators and standards bodies first, then industry associations and their published surveys, then established data providers. Trade press is used for market colour and never for a hard number. We do not cite other advisory firms’ marketing material.
  • Methodology is published, not implied. The five steps above are the actual method behind the estimate. Where the calculator applies judgement, we say so rather than presenting it as arithmetic.
  • Dates mean what they say. Each article shows when it was published and, if it has changed materially, when it was last updated. We do not refresh that date for a design change or a typo, because a date that moves without the content moving is worse than no date at all.
  • We do not publish specific multiple figures by industry. A number attached to a sector, stripped of the earnings convention and business size it applies to, misleads more often than it helps. The articles explain the drivers instead.

If you find something inaccurate or out of date, tell us through the contact form and we will correct it. Corrections to substance are made in the article itself and the updated date moves with them.