How much is my company worth: valuation methods (DCF, multiples, EBITDA)

"How much is my company worth?" is one of the questions that keeps the owners of industrial SMEs awake when a significant transaction is coming: bringing in a partner, a funding round, a succession or, above all, a sale. The honest answer is an uncomfortable one: there is no single number, only a reasonable range that depends on the method applied, on the quality of the information available and on who is sitting across the table. A family-owned metalworking company with five million euros of revenue can be worth very different amounts depending on whether it is valued on the cash it generates, on what buyers are paying for comparable businesses or on its assets. Understanding those methods is the first step to neither underselling nor overvaluing your business.

In this article we explain the three approaches that are genuinely used in the Spanish market for company sales — discounted cash flow (DCF), EBITDA multiples and adjusted net asset value — when each one fits and what makes two companies with the same EBITDA end up selling at very different prices.

Why is there no single value for your company?

It is worth separating three concepts that get mixed up in conversation and that rarely coincide:

• Value: a technical estimate of the business under a specific method. It is what a valuer calculates.
• Price: what buyer and seller finally agree. It depends on the negotiation, on how urgent the deal is for each side and on how many interested parties there are.
• Book value: what the accounts say (net equity), which almost never reflects the real value of a going concern.

The International Valuation Standards Council (IVSC), the international reference body for valuation standards, defines market value as the estimated amount for which an asset would exchange between a willing buyer and a willing seller in an arm's length transaction, after proper marketing and with both parties acting knowledgeably and without compulsion (International Valuation Standards, 2024). That definition makes something essential clear: value is an estimate built on assumptions, not an objective figure set in stone.

That is why professional practice recommends applying at least two methods and comparing the results. If discounted cash flow gives you €4.1 million, multiples €3.8 million and asset value €3.5 million, your negotiating range is well defined. A single method on its own is an invitation to get it wrong.

Are you preparing a transaction and need a rigorous figure? Take a look at our business valuation service and we will help you defend the real value of your business in front of investors or buyers.

Discounted cash flow (DCF): the most technical method

Discounted cash flow — DCF — is the method that financial theory regards as the most conceptually sound, because it values the company on what really matters to a buyer: the cash the business will be able to generate in the future.

The procedure, in short, has three steps:

1. Project the company's free cash flows over a horizon of 5 to 7 years, starting from the business plan and from reasoned assumptions on growth, margins and investment.
2. Discount those flows to present value using a discount rate (the weighted average cost of capital, or WACC), which captures the risk of the business and the cost of its funding.
3. Add the terminal value, which estimates what the company is worth beyond the projected period.

The great advantage of DCF is that it focuses on the ability to generate cash and forces every assumption into the open. Its great limitation is the same one: the result is highly sensitive to those assumptions. A one-point change in the discount rate or half a point in the perpetual growth rate can move the valuation by 15–20%. That is why a serious DCF always includes a sensitivity analysis showing how the value changes under different scenarios.

When to use it: companies with recurring, predictable revenue, growing businesses with a reliable financial plan, or situations that call for a sophisticated valuation aimed at professional investors. It is not the ideal method for highly cyclical businesses or for ones with erratic results, where projecting cash seven years out is an exercise in imagination rather than in analysis.

EBITDA multiples: the method the real market uses

If DCF is the textbooks' preferred method, comparable multiples are what really dominate SME transactions in Spain. The reason is practical: they are quick, intuitive and based on what the market is actually paying.

The logic is simple: you look at how many times their EBITDA (earnings before interest, taxes, depreciation and amortisation) comparable companies in the same sector have sold for, and you apply that multiple to your business. The most common indicator is EV/EBITDA (enterprise value divided by EBITDA), although the P/E ratio or a multiple on sales are also used depending on the case.

TTR Data, one of the main sources of information on the mergers and acquisitions market in Spain and Latin America, regularly publishes the average multiples recorded in each period's transactions (TTR Data, 2024), which lets advisers and business owners test their expectations against real deals. The general principle is that multiples vary substantially by sector, by size and by the moment in the market cycle: technology and services businesses with recurring revenue tend to command higher multiples than traditional industry or retail.

How to apply it, step by step:

• Normalise the EBITDA. Before multiplying anything, adjust the accounting EBITDA: strip out non-recurring extraordinary expenses, correct shareholder salaries that sit above or below market and clean up related-party transactions. A realistic normalised EBITDA is the basis of the whole valuation.
• Select relevant comparables. Companies in the same sector, of a similar size and, where possible, recent transactions.
• Apply the multiple and adjust for debt. The multiple gives the total value of the business (enterprise value); to reach the value of the shares (equity value) you have to subtract net financial debt.

An illustrative example: an industrial SME with a normalised EBITDA of €800,000 that the market prices at a multiple of 5x would have an indicative enterprise value of €4 million. If it carries €1 million of net financial debt, the value to the shareholder would be €3 million. The same business at a multiple of 6x — because it has long-term contracts and depends less on its founder — would be worth a million euros more. That is where you see why the quality of the business, and not only its numbers, decides the final price.

The main limitation of multiples is that they depend on reliable comparables existing and on the EBITDA being properly calculated. A multiple applied to an inflated EBITDA, or to one that has never been normalised, produces valuations that fall apart in the first due diligence.

Adjusted net asset value: when the balance sheet rules

The third approach starts from the balance sheet: you take book equity and adjust assets and liabilities to their real market value. Property carried below its worth, written-down machinery that is still producing, obsolete stock or unrecorded debts are all corrected to arrive at a realistic net asset value.

This method makes sense in businesses where the weight sits in the assets rather than in cash generation: property holdings, asset-holding companies, companies with a lot of machinery or plant, or businesses being wound up. It does, however, systematically undervalue companies that generate profits well above what their assets suggest — precisely because it ignores intangibles: brand, customer base, the team's know-how or recurring contracts.

In practice, adjusted net asset value works well as a valuation floor: a going concern will rarely be worth less than its net assets at market prices. But it is seldom the method that sets the price in the sale of a profitable business.

Which method should I use to value my company?

The short answer: it depends on the type of business and on the purpose of the valuation, and combining several is almost always the right call. This table summarises where each approach fits:

The professional recommendation is to triangulate: apply two or three methods, understand why the results differ and use them to build a defensible value range. That range, rather than a single figure, is what actually helps you negotiate.

Be clear about your figure before you sit down to negotiate. Our business valuation team prepares rigorous reports that combine several methods and stand up to a demanding due diligence.

What makes two companies with the same EBITDA worth different amounts

Two companies can have exactly the same EBITDA and sell at very different prices. The difference lies in the quality of the business, which the buyer translates into a higher or a lower multiple:

Working on these factors before going to market is one of the most profitable ways to increase the value of a company. It is not about dressing up the figures, but about reducing perceived risk: the less the business depends on its owner and the more predictable its revenue, the higher the multiple a buyer is willing to pay.

How to prepare your company for a valuation

A valuation is only as good as the information behind it. Before starting the process it is worth:

1. Putting the finances in order: audited or reviewed annual accounts, reconciliations up to date and financial debt clearly identified.
2. Normalising the EBITDA: adjusting extraordinary expenses, off-market shareholder salaries and related-party transactions.
3. Documenting the assets and intangibles: an up-to-date inventory, property valuations, registered intellectual property, customer base and recurring contracts.
4. Preparing credible projections: a 3–5 year financial plan consistent with the track record and with justified assumptions.
5. Clearing contingencies: litigation, open tax inspections or change-of-control clauses hurt the value and create mistrust.

Arriving at the valuation with this information in order does more than speed up the process: it strengthens your negotiating position and reduces the room a buyer has to chip away at the price during due diligence. If you want to go deeper into that phase, we recommend reading what due diligence is and how to prepare for it.

Frequently asked questions about business valuation

How much is my company worth if all I know is the EBITDA?

EBITDA is the starting point, but it is not enough on its own. For a first reference, multiply your normalised EBITDA by the indicative multiple for your sector and subtract net financial debt. That gives you an approximate equity value, but the real range will depend on how recurring the revenue is, on how much the business depends on its founder and on the quality of the customer base. Treat that figure as a first approximation, not as a closed price.

Which valuation method is the most reliable?

None of them on its own. Discounted cash flow is the most rigorous in conceptual terms, but very sensitive to the assumptions; multiples are the most realistic because they reflect market prices, but they need comparables and a properly calculated EBITDA. The recommended practice is to combine at least two methods and build a value range instead of trusting a single number.

How does market value differ from book value?

Book value (net equity) reflects what the accounts say and almost never matches the real value of a going concern, because it captures neither the ability to generate cash nor intangibles such as the brand or the customer base. Market value estimates what a willing buyer would pay in an arm's length transaction. In profitable companies, market value is usually far higher than book value.

Is a valuation enough to set the sale price?

The valuation sets a technical reference value, but the final price is decided by the negotiation. Factors such as the seller's urgency, the number of interested buyers or the synergies that a particular buyer sees can push the price above or below the calculated value. That is why a good valuation does not look for a magic number, but for a range that can be defended with solid arguments.

How often should I value my company?

It is worth valuing the company whenever a significant transaction is coming — new shareholders, funding, succession or a sale — and reviewing the figure periodically if the company grows or its risk profile changes. Having an up-to-date valuation lets you take strategic decisions on a sound basis instead of improvising when an opportunity arrives.

Conclusion: from the number to the decision

Knowing what your company is worth is not an academic exercise: it is the basis for the most important decisions in the life of a business. The three methods — DCF, EBITDA multiples and net asset value — do not compete with each other, they complement each other to bracket a value range you can negotiate with confidence. And above the technique sits the preparation: a company with orderly finances, recurring revenue and little dependence on its founder will always be worth more than one with the same EBITDA and more risk.

Do you want to know the real value of your company? At Tecnocim Innova we combine several methods to give you a rigorous, defensible valuation. Discover our business valuation service and prepare your next transaction with figures that hold up in any negotiation.