Common valuation methods

The Discounted Cash Flow method (DCF)

The DCF method focuses primarily on the future. Your future earning potential plays a crucial role, rather than past performance. Specifically, we calculate the present value of future cash flows by discounting them with a specific interest rate (the discount rate). Since this method accounts for future projections, market conditions, risk and the time value of money, it's considered the most economically sound valuation approach.

EBITDA multiple method

The EBITDA multiple method is a straightforward, widely-used approach that determines company value by multiplying EBITDA by a specific factor: the multiple. This multiple is influenced by various elements, including growth expectations, risks and market conditions.

This provides a fast, simple way to assess business value. However, finding businesses with similar activities, structure and market profile for comparison is crucial, making this method less suitable for startups.

The adjusted equity method.

The adjusted equity method, also known as the intrinsic value method, determines company value by calculating the total value of its assets minus liabilities. Since this method focuses solely on past performance, it's most suitable for real estate companies and holdings.

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