Business valuation is a complex process that involves a comprehensive analysis of your business, considering financial statements, market conditions, industry trends, and specific factors such as revenue, EBITDA, and growth potential. The most common valuation methods include:

• Market Comparables: Evaluating the trading prices of similar businesses in your industry to benchmark your company’s value.
• Discounted Cash Flow (DCF): Projecting future cash flows and calculating their present value based on an appropriate discount rate.
• Precedent Transactions: Reviewing the valuations of actual businesses that were recently sold to provide a realistic estimate.

For a deeper dive into these valuation methods, check out our article, How to Value a Company for Sale.

Valuation is more than just numbers—it captures the story, potential, and strategic value of your business. Here are six critical considerations that also shape your business’s worth during an Exit:

1. Valuation is a balance of numbers and perception: Ultimately, the price of a business is shaped by buyer perceptions and willingness to pay. These factors are influenced by timing, trends, and market conditions. Each buyer brings a unique perception based on their goals.
2. Beauty lies in the buyer’s perception: Buyers focus on data, risks, and growth potential—not emotional attachments. It’s essential to bridge the gap between your sentimental value for your business and the market’s assessment.
3. Targeting the right buyer yields better returns: Buyers who value specific aspects of your business are more likely to offer a premium compared to those seeking general investments.
4. Business size and stability shape value: Larger businesses with recurring revenue and scalable operations typically command higher valuations, as they represent lower risks and greater growth potential.
5. True comparisons require true parallels: Valuation benchmarks are meaningful only when businesses are similar in industry, size, and growth stage. Irrelevant comparisons, such as a friend receiving a higher valuation for their unrelated business, can lead to unrealistic expectations.
6. The deal structure matters: The overall worth of a deal depends not just on the headline price but also on payment terms, such as upfront cash versus deferred payouts. All cash for a lower valuation could be just as appealing as less cash at a higher valuation.

Axial’s calculator evaluates your business based on its ability to generate future cash flows, using net profit as a key indicator or proxy for cash flow. Alongside net profit, the calculator considers additional inputs like revenue, industry classification, historical growth rates, and qualitative factors, including:

• Profitability Comparison: How do your profits stack up against competitors?
• Customer and Employee Dependence: Is your business reliant on a few key customers or team members?
• Industry Dynamics: Does your business operate in or sell to a heavily regulated industry?

Each of these factors are carefully weighted to estimate your business’s future performance and provide a realistic valuation range—from conservative to optimistic scenarios.

Note: While Axial’s calculator offers a helpful estimate, it’s essential to consult with a professional valuation expert for a precise assessment of your business’s value.

We suggest adding estimates where needed. Keep in mind that more accurate inputs will produce better results.

The valuation results offer a solid foundation for estimating your business’s worth.

However, when preparing to sell, it’s essential to engage an experienced M&A advisor. They can perform a comprehensive valuation analysis and help you navigate the complexities of the sale process, ensuring you maximize value and achieve your goals.

Yes. Axial has a network of over 2,000 investment banks and advisory firms specializing in helping business owners determine their business valuation and navigate the process of selling their companies. We connect qualified business owners with the most relevant advisors for them completely free of charge.

If you’d like to get connected with an expert, you can submit your request here.