Whether you're preparing to sell, buying a company, or planning your estate, understanding business valuation is the difference between negotiating from strength and leaving money on the table. Michelet Financial's certified team explains the process and delivers a defensible number.
Why It Matters
Most owners wait until they're ready to sell before thinking about valuation. That's the most expensive mistake in business ownership. Knowing your number gives you leverage, time to fix weak spots, and clarity for long-term planning.
Knowing your business value before engaging a buyer prevents leaving money on the table. A credentialed valuation sets the anchor for every negotiation that follows.
Buyers need a defensible value to structure the right offer. An independent valuation surfaces hidden risks—customer concentration, margin compression, owner dependency—before you commit capital.
When partners split, the valuation becomes the center of negotiation. An independent, credentialed analysis protects both parties and reduces litigation risk by establishing a number neither side can easily dispute.
Business owners with significant illiquid value need accurate valuations for estate tax purposes and to structure fair transfers to family or employees. The IRS scrutinizes discounts claimed without a formal appraisal.
The Three Methods
Professional valuations use three recognized approaches. The right methodology depends on your industry, business model, and purpose of the valuation.
The most common method for profitable operating businesses. Measures what the business is worth based on its ability to generate future income.
Compares your business to recent sales of similar companies (comparable transactions) or publicly traded industry peers. The output is a market-derived multiple applied to your revenue, EBITDA, or SDE.
Values the business at net fair market value of assets minus liabilities. Best for holding companies, asset-heavy businesses, or unprofitable companies. For most operating businesses, this understates value because it ignores goodwill and earnings power.
Industry Multiples
Industry multiples vary significantly by sector, size, and business quality. These are 2026 median ranges—your specific multiple depends on the drivers listed below.
2–4× SDE
Seller's Discretionary Earnings. The range widens with recurring revenue, customer diversity, and team depth.
4–8× ARR
Annual Recurring Revenue. Growth rate and net revenue retention drive the multiple above or below the midpoint.
3–5× EBITDA
Asset quality, customer concentration, and backlog visibility all determine where in the range you land.
1–3× Revenue
Or 4–6× EBITDA. Client transferability and contract length are the primary multiple drivers.
What moves your multiple above or below the range: Customer concentration (above 20% single-customer = discount), contract length and revenue predictability, management dependency, recurring vs. project revenue ratio, EBITDA margin relative to industry benchmarks, and geographic diversification.
Common Pitfalls
Your loyal customers and reputation are real assets—but buyers pay for documented, transferable relationships, not assumptions about what stays after the sale. Goodwill that leaves with the owner has limited market value.
Valuation works from normalized earnings, not reported earnings. Owner salary above or below market rate, personal expenses run through the business, and one-time items must all be adjusted. Missing normalization significantly distorts value.
Revenue multiples are shorthand. Buyers who offer on revenue will reprice on margin during due diligence. If your margins are thin, a revenue-multiple deal will not survive to closing at the headline price.
If you own the building your business operates in, those assets need separate valuations. Bundling real estate and operating business distorts both numbers and complicates deal structure for buyers.
Our team delivers defensible valuations for planning, negotiation, and transaction purposes—the right methodology, normalized earnings, and a number backed by credentialed analysis.
Our Process
Our certified valuation team provides formal business valuations for planning, negotiation, and transaction purposes. We determine the right methodology, normalize your earnings correctly, and deliver a defensible value backed by credentialed analysis—not a ballpark figure.
Beyond the number, we help business owners understand what drives their value and what specific moves would meaningfully increase it before going to market. Owners who start the process 2–3 years before a planned sale consistently achieve better multiples than those who engage 90 days before listing.
We also serve as M&A advisor and business broker, so we see deals from both sides: the preparation that commands a premium and the due-diligence failures that kill deals at closing.
If you are considering a sale in the next 1–3 years, establish a valuation baseline now. See also: Business Valuation • Corporate Valuation • Sell My Business • Exit Planning.
FAQ
A credentialed valuation from Michelet Financial gives you a defensible number—and a clear picture of what would make it higher. Start with a free consultation.
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