Ask ten owners what their business is worth and you will hear ten confident answers. Ask a buyer and you will hear something more disciplined. The difference between those two numbers is where most deals are won or lost.
Most private businesses are valued on a multiple of profit, usually a multiple of EBITDA, which is earnings before interest, tax, depreciation and amortisation. A business earning 20 million rand of EBITDA at a multiple of five is worth around 100 million rand before adjusting for debt and cash. Simple in theory. The hard part is the multiple.
The multiple is not a fixed number handed down by an industry. It reflects how a buyer sees risk and opportunity. Predictable, recurring revenue lifts it. A heavy reliance on one customer, one supplier or one owner pulls it down. Growth, margins, the quality of your management team and the state of your financial records all move the needle. Two businesses with identical profits can be worth very different amounts.
There is also a gap between the headline price and what actually lands in your account. Debt, working capital and deal structure all shape the final figure. A strong price on paper can quietly shrink once these are settled.
Knowing your likely range before you go to market is powerful. It sets realistic expectations, highlights the value drivers worth improving first, and stops you accepting an offer that undersells years of work.
Talk to Deal Team International
Want to understand what your business could be worth and how buyers are likely to view it? Reach out and we will talk you through how we can assist.
Anthony Monné · anthony@dealteamintl.com