What is my business worth? The methods buyers use

Two buyers look at the same company and name very different prices. Both can be right. The value of a business is not a number waiting in the accounts, but an estimate of what the business will earn for its next owner, and how certain that is. Value and price are also two different things: the value you calculate is a starting point, the price is what the negotiation produces.

Owners planning a sale, advisers guiding a succession and corporate teams assessing an acquisition all need to understand how buyers calculate. This article explains the methods, shows where value sits and where it leaks away.

Four ways to value a business

The definitions of DCF and relative valuation follow Aswath Damodaran: DCF relates the value of an asset to the present value of expected future cash flows, relative valuation looks at the pricing of comparable assets (source: NYU Stern, November 2026).

In practice, valuers combine methods. Rabobank describes how a DCF valuation is compared with the value under the multiple method (source: Rabobank, November 2026). If the outcomes are far apart, revisit the assumptions.

Goodwill: value above the book value

Goodwill is what a buyer pays above assets minus liabilities, because the business earns money with its customers, brand, processes and people. Who that profit depends on makes a big difference. Goodwill that belongs to the business transfers with it; goodwill that depends on the owner personally largely leaves with the owner. A consultancy where every client comes for the founder has less transferable value than one where a team serves the clients.

Normalising: profit as a buyer sees it

Every valuation starts with profit. But the profit in your accounts is rarely the profit a buyer works with. A valuer adjusts at least these items:

• Owner or management pay: an owner who pays themselves little makes profit look higher than it is for a buyer, who must pay a replacement at market rates.
• One-off items: an insurance payout, a lawsuit or one exceptional order do not belong in sustainable profit.
• Related-party rent: if the business rents from its owner at a non-market rent, the buyer corrects to market rent.
• Private costs: cars, travel or other spending that does not belong to operations.
• Group charges: in a corporate carve-out, management fees and shared services must be replaced by realistic stand-alone costs.

Where value sits, and where it leaks

Why does one buyer pay more than another? Damodaran shows that high-growth sectors tend to have higher value-to-EBITDA multiples, and that higher costs of capital lead to lower multiples (source: NYU Stern, November 2026). In plain words: growth raises value, risk lowers it. A buyer looks for everything that makes future profit more certain, and for everything that makes it less certain.

From value to deal

• Earn-out: part of the price is paid only when agreed targets are met. Define the targets in measurable terms, or the discussion starts later.
• Vendor loan: the seller finances part of the price, often subordinated to the bank. It keeps the seller involved and closes a financing gap, but it shifts risk to the seller.
• Tax: the tax treatment of a sale differs strongly by country and by deal structure, such as a share sale versus an asset sale. Have a tax adviser calculate it before you negotiate.

For an independent valuation, work with an accredited business valuer. Read also: succession and exit, buying a business and due diligence in an acquisition.

Worked example, price reducers and a sale-ready plan

You know the methods now. Below you will find a full worked example, from annual accounts to normalised profit and value, the ten points buyers use to push the price down with the fix for each, and a three-year plan to make a business ready for sale.