Question 1

How is business value calculated?

Accepted Answer

The most common method is the EBITDA multiple: EBITDA × industry multiple (typically 4–10× for SMEs). Other methods include revenue multiples, earnings (P/E) multiples, and net asset value (assets minus liabilities). DCF (Discounted Cash Flow) is the most accurate but requires future projections.

Question 2

What is an EBITDA multiple and what affects it?

Accepted Answer

The EBITDA multiple tells how many times the annual EBITDA a buyer pays. It depends on industry, growth rate, customer base quality, recurring revenue, competitive advantage and market conditions. SaaS companies command 10–20×, construction companies 3–6×.

Question 3

What is Net Asset Value (NAV)?

Accepted Answer

NAV = total assets − total liabilities. It is the "floor value" of a business — what would remain if everything were sold. A profitable operating business is generally worth more than its NAV alone due to customers, brand, and expertise.

Question 4

What does DCF analysis mean?

Accepted Answer

DCF (Discounted Cash Flow) calculates the present value of future cash flows. You project free cash flows 5–10 years forward, discount them to present using the WACC rate, and add a terminal value. The method is sensitive to assumptions and best suited for stable businesses.

Question 5

When is the best time to sell a business?

Accepted Answer

The best time to sell is when revenue is growing, profitability is strong, and trends are upward. Buyers pay more for future potential than past performance. Also, owner-independence (the business runs without the owner) significantly increases value.

Question 6

What is WACC?

Accepted Answer

WACC (Weighted Average Cost of Capital) is the weighted average cost of capital — the investor's required return. For SMEs, a typical WACC is 10–20%: the riskier the business, the higher the discount rate and the lower the DCF value.

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