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The 7 factors that determine the value of your company
Two companies in the same sector, with the same revenue and similar profits, can receive offers that differ by 40%. The difference is never down to a single thing: it lies in these seven factors, which are what any buyer, investor or financial institution analyzes before putting a figure on the table.
01. Financial results
The starting point of any valuation. Buyers look at revenue and its evolution, net profit, EBITDA, margins by business line, indebtedness and free cash flow.
But the figures only tell part of the story. Many excellent companies look “cheap” in their financial statements, because what makes them attractive (recurring revenue, loyal clients, defensible margins) cannot be read in an income statement.
02. Growth potential
A buyer does not pay for what the company generates today. A buyer pays for what it will be able to generate tomorrow under their management.
The analysis covers historical growth and its consistency, the capacity for geographic expansion, innovation, the scalability of the model (does growing by 30% require 30% more structure?) and the degree of digitalization.
A company with demonstrable growth obtains clearly higher multiples than a flat one, even if both earn the same.
03. Intangible assets
This is where many companies discover they are worth more than they thought: brand, proprietary technology or software, patents, know-how, client portfolio, documented processes, reputation.
They are rarely well reflected on the balance sheet, but they can account for most of the total value. With a nuance that changes negotiations: an intangible only adds value when it can be demonstrated. If it exists but has not been identified or documented, then for the buyer it does not exist.
We expand on this in The intangible assets that most increase the value of a company.
04. Risk level
The factor most underestimated by owners and most closely watched by buyers. The lower the perceived risk, the higher the value.
What drives risk up:
Excessive dependence on a single client
Dependence on the founder to operate or to sell
High turnover of key employees
Open litigation or tax contingencies
Weak or verbal contracts
Concentration in a single product or market
Reducing these risks translates into a smaller discount on the price and less money held back in guarantees.
05. The team and the organization
A business is not worth only what it sells, but who makes it possible when the owner is not there.
The analysis covers the strength of the management team, middle management leadership, workforce stability, retention of critical talent and the real distribution of responsibilities.
A company that operates autonomously is significantly more attractive. And more expensive.
06. Sector and market
Not all sectors are valued in the same way. An excellent company can receive a modest valuation if it operates in a mature or shrinking market. Sectors that are growing and have barriers to entry systematically achieve higher multiples.
The factors that weigh in are expected market growth, competitive intensity, the regulatory framework, internationalization and the pace of innovation.
Indicative ranges in EBITDA multiples by sector.
07. Prior preparation
Many companies start organizing their documentation only once someone is already interested. The best negotiations begin much earlier.
Arriving with the information in order, the contracts reviewed and the assets identified changes the entire dynamic of a transaction. In many cases, the difference between a good negotiation and an excellent one does not lie in the company, but in how well prepared it is when it comes to the table.
Which one weighs the most
There is no universal answer, but there is a clear pattern in small and medium-sized companies: risk and founder dependency generate the most discount, and growth potential justifies the largest premium. Financial results set the starting point, not the final outcome.
Look at your company factor by factor
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