Valuation Techniques Ahead of Selling or Scaling Your Business

IRS Circular 230 Disclosure: We do not provide tax advice. Any discussion of U.S. tax matters is not intended or written to be used for the purpose of avoiding U.S. tax-related penalties and is created solely for illustrative purposes.

Introduction: Know Your Number—Before the Market Does

You can't negotiate from strength unless you understand your worth. But too many owners head into M&A discussions without a grounded view of their company's true value—and leave money on the table as a result.

At William & Wall, we help sellers build valuation narratives that hold up to investor scrutiny. Here's a primer on the techniques buyers—and professional advisors—use to assess private middle market companies.

1. EBITDA Multiples: The Market Standard

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is the cornerstone metric in middle market M&A.

• Valuation = Adjusted EBITDA × Market Multiple

• Multiples vary based on industry, growth, customer concentration, and size

🧠 Pro Tip: Normalize your EBITDA to reflect add-backs like owner compensation, personal expenses, or one-time costs. That’s what buyers are buying.

📉 Example:
$4.0M Adjusted EBITDA × 6.5x Multiple = $26M Enterprise Value

2. Discounted Cash Flow (DCF) Analysis

The DCF approach estimates value based on projected future cash flows, discounted to today’s value using a risk-adjusted rate.

• Most useful in capital-intensive or high-growth businesses

• Sensitive to forecast quality and terminal assumptions

📉 Buyers may use DCF to argue down value by applying higher risk premiums or conservative growth assumptions.

🧠 Seller Strategy: Build a defensible forecast backed by historical performance and credible assumptions. Have a QoE provider validate it.

3. Comparable Company Analysis (Comps)

This method evaluates how similar public or private companies are valued—typically using multiples of revenue or EBITDA.

• Public comps often set ceiling benchmarks

• Private comps offer realistic ranges but are harder to access

📊 We use proprietary M&A data to benchmark your valuation against real-world transactions across Arizona and nationally.

4. Precedent Transactions

Looks at prior M&A deals in your sector and size range. These are real-world transactions that reflect actual buyer behavior.

✅ Best For: Establishing value benchmarks based on real deals
⚠️ Caution: Older deals may not reflect current market conditions. Some databases may lack context (e.g., structure, growth rate, risk profile).

5. Investment Value vs. Fair Market Value

Fair Market Value (FMV) reflects what a hypothetical willing buyer and seller would agree upon in a competitive market.
Investment Value reflects a specific buyer’s unique reasons to pay more—like cost synergies, market access, or platform value.

🧠 Smart Sellers Target Investment Buyers:
Strategics and private equity firms seeking bolt-ons will often pay above FMV for the right strategic fit.

6. Owner Value Is Not Market Value

Many founders attach emotional premiums to their business—based on sweat equity, years of effort, or revenue growth.

💬 “We’ve grown 20% every year. That’s got to be worth 10x EBITDA, right?”

📉 Not necessarily. Buyers are disciplined. Your valuation must be defensible, not just aspirational.

7. The Role of Deal Structure in Valuation

Valuation isn’t just the headline number. It’s also:

• How much is paid at closing?

• How much is tied to performance (earnouts)?

• Is seller financing involved?

• Are working capital adjustments baked in?

🧠 Net proceeds > enterprise value. Always.

Conclusion: Your Valuation Is a Strategy—Not Just a Number

Understanding valuation is about more than getting a fair price. It’s about being able to defend that price, structure it wisely, and align it with your long-term goals.

📍Based in Scottsdale and serving clients nationwide, William & Wall delivers valuation guidance that’s credible in the eyes of private equity buyers, family offices, and strategic acquirers.

Thinking About Selling? Start with the Right Valuation.

At William & Wall, we combine technical rigor with market insights to guide owners toward a successful exit. Don’t just guess your value—prove it.