How to Estimate the Value of a Business Before Meeting With a Valuation Firm
- Marc Lowe
- Jul 22
- 5 min read
Updated: Jul 23
For business owners considering a sale, one of the first and most pressing questions is:
“What is my business worth?”
There are plenty of professional valuation firms, CPAs with deep experience, and M&A advisors ready to provide a formal business appraisal. But before investing in those services, it’s important for a business owner to have a ballpark idea of what to expect. Just like checking Zillow before listing a house, there are ways to estimate a business’s value using publicly available data and simple financial math.
Here’s how i help clients think about business valuation — even before involving formal advisors.
Start With the Fundamentals: Revenue, EBITDA, Assets, and Liabilities
Just like residential real estate values are influenced by square footage, condition, and neighborhood comps, a business’s value is largely driven by its financial performance and structure.
There are four key data points that form the foundation of a basic valuation:
Revenue – The total sales or income the business generates
EBITDA – Earnings Before Interest, Taxes, Depreciation, and Amortization; a widely used measure of a business’s cash flow or profitability
Liabilities – Outstanding debts or financial obligations
Assets – This includes both tangible items like real estate or equipment and intangible assets such as intellectual property
By collecting these numbers, an owner can begin comparing their business to others in the same industry or niche.
Understanding EBITDA Multiples
One of the most common methods of estimating business value is by using an EBITDA multiple. This approach involves multiplying the business’s EBITDA by a certain factor — often based on what similar businesses have sold for.
For example, if a business generates $100,000 in EBITDA and similar companies are selling for 4x EBITDA, then:
$100,000 x 4 = $400,000 estimated value
While the actual multiple can vary by industry, size, and risk profile, this method gives a quick starting point. Businesses with recurring revenue, strong margins, or proprietary processes may command higher multiples, while those with inconsistent earnings might see lower ones.
When Revenue Matters More Than Profits
Sometimes a company may have strong revenue — say, $1,000,000 — but slim profits due to reinvestment, overhead, or debt service.
In these cases, buyers may still see value in the revenue streams. Especially strategic buyers or cash-rich acquirers may be more focused on top-line growth potential than bottom-line earnings.
If similar businesses are selling for, say, 5x revenue, that could put the valuation closer to:
$1,000,000 x 5 = $5,000,000
This high-end estimate is typically reserved for companies with scalable models or unique growth opportunities. Still, it’s important for the business owner to understand that revenue-based valuations may not apply universally — and the buyer’s motivation plays a significant role.
Don’t Forget the Balance Sheet: Assets and Liabilities
While revenue and profits get the most attention, the business’s balance sheet plays a key role in valuation.
Let’s say the business has:
$600,000 in liabilities, such as loans or credit lines
$400,000 in assets, like owned real estate, vehicles, or equipment
That gives the buyer a sense of the business’s debt-to-equity ratio. In some cases, a buyer may be willing to take on the debt in exchange for consistent revenue. In others, they may reduce their offer or structure the deal in a way that leaves the debt with the seller.
Either way, these numbers affect the final valuation — and they should be factored in from the beginning.
Putting the Range Together
Combining all of this, a business owner might find themselves with a valuation range that looks something like this:
Low end: $400,000, based on 4x EBITDA of $100,000
High end: $5,000,000, based on 5x revenue of $1,000,000
This wide spread is common — and it highlights why business valuation is both an art and a science. The final number will depend on factors like industry norms, the buyer’s perspective, how well the business is documented, and even market timing.
But having this basic range gives the owner an important edge when they walk into a conversation with a CPA, business broker, or M&A advisor.
Why Early Valuation Awareness Matters
At In The Money Retirement, many business owner clients begin financial planning years before they’re ready to sell. Mapping out a potential value range early helps guide other key decisions — like retirement planning, tax strategy, and whether to reinvest in or restructure the business ahead of a sale.
Having even a basic understanding of a business’s potential value allows owners to:
Set realistic expectations before formal negotiations
Ask sharper questions of valuation professionals
Identify gaps or risks that could hurt a future sale price
Understand how liabilities, revenue trends, and industry comps affect their exit strategy
And perhaps most importantly, it gives owners clarity — the kind that makes long-term planning possible.
Ready to Explore Your Business's True Value?
For business owners preparing to sell within the next 1–5 years, having a clear financial roadmap is essential. In The Money Retirement specializes in helping self-made entrepreneurs and family-owned businesses design exit strategies that align with their retirement and legacy goals.
If you’d like help reviewing your numbers, modeling your after-tax proceeds, or coordinating with a CPA or valuation firm, our team is here to help.
About The Author
Marc Lowe is the Founder & President of In The Money Retirement Planning. He is a Certified Financial Planner and member of NAPFA National Association of Personal Financial Advisors, XY Planning Network & Fee-Only Network. He works with retirees and those approaching retirement. He has over a decade of experience helping these folks grow their net worth, organize their finances and build better lives for themselves and their families.
The information presented in this Presentation is the opinion of the author and does not reflect the views of any other person or entity unless specified. The information provided is believed to be reliable and obtained from reliable sources, but no liability is accepted for inaccuracies. The information provided is for informational purposes and should not be construed as advice. Advisory services offered through In The Money Retirement, an investment adviser registered with the state of Connecticut. The information linked to on third-party sites is being provided strictly as a courtesy and convenience. When you link to any of the web sites provided here, you are leaving this website. We make no representation as to the completeness or accuracy of information provided at these websites. When you access these websites, you are leaving our website and assume any and all responsibility and risk for use of the web sites you are visiting.The tax and estate planning information offered by the advisor is general in nature. It is provided for informational purposes only and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.
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