Questions about business value
One question, one page, one answer. The things owners actually ask before they find out what their company is worth.
·1 min
Can I value a business with one year of accounts?
Yes, but the range widens substantially and the multiple drops. Buyers price uncertainty, and a single year gives them no trend to price against.
·1 min
Do I need a formal valuation for the tax authority?
Only where a transaction between related parties has to be shown at arm's length — share transfers, restructurings, gifts and inheritance. Not for deciding whether to sell.
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How much tax will I pay when I sell my business?
In the Netherlands, selling shares held through a holding BV is normally exempt at the holding level; tax arrives in box 2 when you take the money out personally.
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What documents do I need for a business valuation?
Three years of accounts, management figures, revenue by customer, contracts and a capex history. Seventy percent of valuation time is spent gathering these.
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What if my accounts are messy?
It widens the range rather than preventing a valuation. But messy accounts cost real money at sale — they lengthen due diligence and shift the burden of proof onto you.
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What is an earn-out?
Part of the price paid later, conditional on performance. It is what a buyer proposes when they cannot price a risk — most often customer concentration or owner dependence.
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How long does selling a business take?
Six to twelve months from first conversation to completion, plus twelve months of preparation beforehand if you want the outcome to be good.
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Should I use a broker to sell my business?
Usually yes above €1M of value, where access to buyers and process management earn the fee. Below that, the fee is a large share of the proceeds.
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What is due diligence?
The buyer's verification of everything you have claimed. It typically runs six to twelve weeks, and its purpose is to find reasons to adjust the price you already agreed.
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How do I prepare my business for sale?
Twelve months, in four blocks: reduce owner dependence, clean the accounts, improve revenue quality, clear the legal ground. The first block matters most and takes longest.
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What do buyers look at first?
Revenue concentration and owner dependence, usually within the first hour and usually before the profit figure. Both answer whether the business survives the transaction.
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When is the best time to sell my business?
After two years of demonstrable improvement, not after one exceptional year. Buyers pay for trends, and a single strong year raises the question of why you are selling now.
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Does my industry affect my multiple?
Less than owners expect. Sector sets a rough band; size, concentration, revenue quality and owner dependence decide where inside it you land — and that spread is wider than the gap between sectors.
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How much do customer contracts increase value?
Nobody has published a number. What a contract does is convert an assumption a buyer has to make into a fact they can read, and the four terms below decide whether it works.
·2 min
Does my business being dependent on me lower the price?
No published study puts a number on it. What is measured is that CEOs move operating performance, and that dependence narrows the buyer pool, which is the more concrete cost.
·1 min
Does working capital affect valuation?
Yes, through the working capital peg — the normal level a buyer expects to come with the business. Anything short is deducted from what you receive.
·1 min
How does debt affect the sale price?
It is deducted from enterprise value, euro for euro. But buyers define debt more broadly than owners do — leases, tax owed and shareholder loans usually count.
·2 min
Does customer concentration lower my valuation?
The direction is well evidenced and the size of the effect is not. Concentration raises a buyer's cost of capital and reduces the number of bidders, which is where the money goes.
·2 min
How does growth affect valuation?
Growth raises the earnings a multiple is applied to, which is certain. Whether it raises the multiple itself is far less well evidenced than the figures in circulation suggest.
·2 min
How does recurring revenue affect valuation?
Predictable earnings are worth more, and the finance research supports that. No published study measures how much recurring revenue adds to a small business multiple.
·1 min
What is the difference between enterprise value and equity value?
Enterprise value is what the operating business is worth. Equity value is what reaches you — after debt is deducted and surplus cash added. The gap is often six figures.
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What is terminal value?
Everything beyond the forecast horizon, compressed into one number. In an SME discounted cash flow it is usually 60 to 75 percent of the total valuation.
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What is asset-based valuation?
Net assets restated at realistic values. It sets the floor for most businesses and the actual price only where earnings are weak or the assets are the business.
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Which valuation method is most accurate?
None of them. Accuracy is the wrong frame — the useful method is the one your buyer will use, and for most SME transactions that is an earnings multiple.
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Why do valuation methods give different answers?
Because each encodes different assumptions about the future. The gap is not an error to average away — it is the most useful output of the whole exercise.
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Is EBITDA the same as profit?
No. EBITDA sits above interest, tax, depreciation and every cash movement that is not in the P&L. A business can grow EBITDA every year while running out of money.
·1 min
What discount rate should I use?
18 to 25% for an owner-managed SME. Below 12% implies a predictability most small businesses do not have; above 30% usually means the forecast is the problem, not the rate.
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What is a DCF valuation?
A method that forecasts future cash flows and reduces each year by a discount rate reflecting risk. For SMEs, terminal value is usually 60–75% of the answer.
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Can I add my salary back to EBITDA?
Only the portion above a market rate for the work you actually do. Adding the whole salary back assumes the buyer gets a free chief executive, which no buyer accepts.
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What counts as a one-off cost?
Something that happened once, will not recur under new ownership, and has a document behind it. Three years of 'one-offs' are operating costs with an optimistic label.
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What is adjusted EBITDA?
EBITDA restated as it would look under a new owner — owner compensation at market rate, one-offs removed, personal costs stripped. It is the figure valuations actually use.
·1 min
Should I use SDE or EBITDA?
SDE if one owner works full time in the business and the buyer will replace them personally. EBITDA once a management layer exists. The multiples are not interchangeable.
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What is EBITDA?
Earnings before interest, tax, depreciation and amortisation — an attempt to measure what a business earns from operating, before the current owner's financing and accounting choices.
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What is SDE (seller's discretionary earnings)?
The total financial benefit one owner-operator takes from a business in a year — operating profit plus owner compensation, benefits and one-off costs added back.
·2 min
Does company size affect the multiple?
More than any other single factor, and it is the one claim in this field that replicates across four independent datasets on three continents. The reason is the buyer pool.
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What is an ARR multiple?
Annual recurring revenue times a figure between 3 and 8, used for subscription software. Churn and net revenue retention decide where inside that range you land.
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How do I find the multiple for my industry?
Published sector averages are drawn from transactions far larger than most SMEs. Confirm the size band before using any comparable — and if you cannot find it, do not use the figure.
·1 min
Is a 3x multiple good?
It depends on what it is three times. Three times EBITDA is low for most businesses above €500k of earnings; three times SDE is at the top of the range for a small one.
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What is a revenue multiple?
A shortcut that prices a business at a number of times turnover, assuming margin is predictable within a business model. Divide it by your margin to see what it really implies.
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What is a good EBITDA multiple?
Four to six times for an SME under €2M of EBITDA, two to four below €500k. Where you sit inside the band matters more than the band itself.
·1 min
What multiple do small businesses sell for?
Most businesses under €1M of turnover sell for 2 to 3.5 times SDE. The figure that trips owners up is which earnings number that multiple applies to.
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Why do some companies sell for higher multiples?
Four reasons account for nearly all of it: size, growth, revenue quality and independence from the owner. Only the first has published numbers behind it.
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How long does a business valuation take?
Hours for an indicative range once the figures are in one place, two to six weeks for a formal valuation. Most of that time is spent normalising accounts, not calculating.
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How much does a business valuation cost?
From €9 for an indicative range to €15,000 for a formal signed valuation. The difference is liability, not accuracy — and most owners only ever need the first.
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Can I value my business myself?
Yes, to within a defensible range. The limit is not arithmetic — it is objectivity about your own assumptions, which is why the workings matter more than the number.
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How many times profit is a business worth?
Two to six times normalised earnings for most owner-managed businesses — but 'profit' has to mean the right thing, and reported net profit almost never does.
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What is my company worth based on revenue?
Revenue multiples run from 0.3× to 8× depending on business model — but any revenue multiple is an earnings multiple in disguise, and dividing by your margin reveals which.
·1 min
How do I calculate the value of my small business?
Four steps: normalise the earnings, pick the right earnings figure, apply a size-appropriate multiple, then adjust for debt and cash. Worked example included.
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How much is my business worth?
Most owner-managed businesses sell for two to six times normalised annual earnings. Where you land inside that range depends on four things you can check today.
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What is a business valuation?
An estimate of what a business would change hands for between a willing buyer and seller — expressed as a range with its assumptions attached, not as a single figure.