Valuing a company: the main methods

“How much is my company worth?” is the question that opens every negotiation for a sale, the entry of a partner or a succession. The honest answer is: it depends on the method and on who is looking at the numbers. There is no single, objective value — there is a reasonable range, which different methods return from different angles.

Why value is never a single figure

Price and value do not coincide. Value is a technical estimate; price is what buyer and seller agree on, influenced by negotiation, synergies, urgency and alternatives. A serious valuation produces a range, not a point. Anyone who promises “the exact value” is oversimplifying.

The three most used approaches are discounted cash flows, market multiples and the net asset method. They are often applied in parallel and their results compared.

Discounted cash flow method (DCF)

This is the most common approach for companies with going-concern prospects. The logic: a business is worth as much as the future cash flows it is able to generate, brought back to today.

The steps in brief:

Free cash flows are projected over a multi-year horizon (typically 3–5 years).
A terminal value is estimated to represent the subsequent period.
A discount rate is chosen that reflects the risk of the business and the cost of capital.
All flows are discounted to present value and summed.

The delicate point is the rate: small variations change the result significantly. That is why the DCF is powerful but sensitive to assumptions. It must be built on realistic plans, not on optimistic projections.

Multiples method

Here the focus is on the market: how comparable companies are valued relative to an economic measure. The most common multiples are applied to EBITDA, to turnover or to earnings.

The idea is simple: if similar companies in the same sector are worth, for example, a given multiple of EBITDA, that multiple is applied to your own company. The method is quick and anchored to real transactions, but it requires care:

The comparables must be genuinely similar in sector, size and margins.
Multiples vary greatly across sectors and over time.
A small company is rarely worth as much as a large listed one: discounts for size and liquidity apply.

Net asset method

This starts from adjusted net equity: balance sheet assets and liabilities are taken and revalued at current values (real estate, machinery, inventory, receivables). The result is the value of the owners’ equity “at real values”.

It is suited to real estate companies, holdings or asset-intensive businesses. It is less appropriate for service firms, where value lies in skills, clients and the ability to generate income — elements that the balance sheet does not capture.

The practitioners’ method in Switzerland

Swiss practice widely uses an approach that combines earnings value and net asset value, often weighting the ability to produce income more heavily. It is also used as a reference for tax purposes for unlisted securities. It remains an indication, not a verdict: a real negotiation requires an analysis built on the specific case.

What moves the value

Beyond the formula, some factors concretely shift the estimate:

Dependence on the owner: if the company only runs thanks to the founder, it is worth less to a buyer.
Client concentration: a few clients that weigh heavily increase the risk.
Recurring revenue: stable, predictable income is worth more than episodic revenue.
Quality of margins and sustainability over time.
Orderly accounts: clear financial statements and solid documentation reduce the risk discount.

In summary

Value is a range, not a single figure.
The DCF looks at future flows; multiples at the market; the net asset method at balance sheet values.
They are used in parallel and compared.
Qualitative factors — dependence on the owner, clients, recurrence — weigh as much as the formulas.

How we help you

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