Business valuation
What is your business worth?
The answer that matters is what a buyer would pay. We look at your business the way buyers do, starting with what it really earns, and give you a realistic range and the reasons behind it.
Estimate your business value
Enter figures from your most recent income statement. The calculator adjusts your earnings the way buyers do, then applies a range of multiples you choose. Nothing you enter is sent or stored.
Hypothetical figures, the same as the example above. Replace them with your own.
Adjusted EBITDA margin: —
Based on adjusted EBITDA and the multiples you entered.
This is an illustration based only on the figures and multiples you entered. It isn’t a formal valuation, a market estimate or a likely sale price. A real assessment also considers the trend and quality of earnings, working capital, debt, assets, risks and current market conditions.
Discuss Your EstimateWhy owners ask us this
Some are thinking of selling. Others want to plan their retirement, bring in a partner, or simply know where they stand.
Whatever the reason, the useful answer is a range, not a single number, along with what’s pushing it up or down. That tells you whether a sale makes sense now, and what to work on if it doesn’t.
Our view of value is an advisor’s analysis to help you make decisions about a sale, financing or planning. It isn’t a formal valuation report. If you need one, for example for tax, legal or shareholder purposes, we can work with a qualified business valuator.
Step one: what the business really earns
Private company financial statements are usually set up to keep taxes down, not to show a buyer what the business earns. So we adjust them.
The chart above shows a simplified, hypothetical example. The business reports net income of $420,000. Add back interest, taxes and depreciation, one-time costs and personal expenses run through the company, and the owner’s own pay, and you get seller’s discretionary earnings (SDE) of $975,000: the total benefit to one owner who runs the business.
A buyer who would hire a manager instead of running it themselves deducts a market salary for that role. Here that leaves adjusted EBITDA of $825,000.
Smaller, owner-run businesses are usually valued on SDE. Larger ones, and most investment buyers and lenders, use adjusted EBITDA. More on SDE and EBITDA.
- Owner pay
- Your salary, bonuses and benefits, replaced with what it would cost to hire someone for the role
- Personal expenses
- Vehicles, travel or other costs that wouldn’t continue under a new owner
- One-time items
- A lawsuit, a move, an unusual repair: costs that won’t happen again
- Related-party rent
- Rent paid to a property you own, adjusted to market rates
- Family on payroll
- Pay for relatives adjusted to match the work they actually do
Step two: what makes it worth more, or less
Buyers pay more for earnings they’re confident will continue. These are the things they look at most closely.
How much it depends on you
TransferabilityIf customers, suppliers and know-how all run through the owner, part of the value may leave when you do.
Customer concentration
RiskOne or two customers making up a large share of sales makes buyers and lenders nervous.
Quality of the numbers
TrustConsistent statements that match your tax filings are worth more than results that need a lot of explaining.
Repeat and contracted revenue
PredictabilityService contracts, long-standing accounts and repeat orders make future results easier to rely on.
Equipment and working capital
Cash needsAging equipment that needs replacing, or a business that ties up a lot of cash in inventory, lowers what a buyer can pay.
Industry and trend
OutlookGrowing results in a stable industry support a higher price than flat or falling results in a shrinking one.
A worked example
Two hypothetical businesses with the same earnings, and why a buyer would value them differently.
| Business A | Business B | |
|---|---|---|
| Adjusted EBITDA | $800,000 | $800,000 |
| Largest customer | 45% of sales | Under 10% of sales |
| Day-to-day management | Owner handles key accounts and pricing | General manager in place |
| Revenue | Mostly one-off orders | Mix of repeat orders and service contracts |
| Illustrative multiple | 3.0× to 3.5× | 4.0× to 4.5× |
| Illustrative value range | $2.4M to $2.8M | $3.2M to $3.6M |
Business B isn’t more profitable. A buyer is simply more confident its earnings will continue after the sale, so it’s willing to pay more for them. Much of that gap is within an owner’s control, given a year or two.
The multiples here are made up to illustrate the point. They are not market data and don’t apply to any real business or industry.
From a client
More testimonialsKingston’s valuation was consistent with the independent valuation we had obtained before going to market. They acted with urgency, introduced serious buyers within a few months, and remained calm and composed through the LOI, due diligence and sale process. We were very satisfied with the outcome.
Questions about value
All FAQsHow do you work out what my business is worth?
Buyers start with earnings, but not the profit on your tax return. We first adjust (normalize) the financial statements to remove personal, one-time and non-operating items and show what the business really earns. For smaller owner-operated companies that is usually seller’s discretionary earnings (SDE); for larger ones, adjusted EBITDA.
We then look at what buyers have paid for similar businesses and at the things that make your company more or less risky: customer concentration, recurring revenue, how much it depends on you, the condition of equipment, working capital needs and the outlook for your industry. The result is a realistic value range rather than a single number.
What can I do now to increase the value of my business?
The changes that usually matter most are clean, consistent financial statements, less dependence on you personally, a broader customer base, documented processes and agreements, and steady or improving results in the years before a sale.
Not every improvement is worth the time. Part of a preliminary conversation is working out which changes are likely to affect what a buyer would pay, and which are not.
How can I get the best price for my business?
Start by presenting the business clearly and credibly. Buyers need to understand its financial performance, market position, strengths and growth potential.
We normalize the financial results, prepare the transaction materials, find and screen qualified buyers and run the process so that, where possible, more than one buyer is interested at the same time. The aim isn’t only a good price. It is also favourable terms, protected confidentiality and a better chance that the deal actually closes.
Other ways we can help
Confidential conversation
Curious what your business might be worth?
We can give you a realistic view of how buyers would see your business today and what would change it. It’s confidential, and useful whether a sale is months or years away.