Methods for valuing your SME before a transfer

“What is my company really worth?” This is often the first question a director asks when considering a transfer or sale. And the answer is rarely straightforward.

A company’s value is not limited to its revenue or its profit. It relies on financial methods… but also on more structural elements. Here are the valuation principles used before a transfer and what they concretely mean for you.

01.The asset-based method: the value of assets

This method consists of valuing:

• The company’s assets (fixed assets, investments, clientele…)
• Existing debts

This yields an adjusted net book value. It is relevant when the company holds significant assets or when the business relies heavily on tangible assets. However, it can underestimate the real value if the company has strong profitability.

02.The multiples method: the market benchmark

This method applies a multiple (often based on EBITDA, cash flow, or net income) depending on the industry, the size of the company and comparable transactions.

03.The profitability method (DCF)

The Discounted Cash Flow method relies on projected future cash flows and their discounting at a risk rate. It values the company’s potential rather than its past.

This approach is relevant when the company has strong visibility and solid growth prospects. However, it requires realistic and structured forecasts.

04.Taking strategic value into account: beyond the numbers

This is often where the real difference lies. A company’s actual value also depends on:

• the strength of its organisation
• dependence on the director
• the quality of the teams
• the recurrence of contracts
• the competitive position
• the ability to operate without its founder

« Two companies with the same results can have very different valuations depending on their level of structuring. »

05.Upstream preparation: a real optimisation lever

A valuation is not set in stone. Preparing the transfer several years in advance improves financial indicators, structures governance, secures key contracts and reduces dependence on the director. In short, it presents a company that is more readable and more desirable for a buyer.