Small Business Valuation — How to Work Out the Price

If you're selling your company — or buying out a business partner — the price is the first question. Here are the valuation methods most commonly used for small and medium-sized businesses.

1. Net asset value (equity)

Assets minus liabilities. Simple, but it often undervalues companies with steady earnings.

2. Earnings multiple

Normalised earnings (EBITDA) × a multiple. Small businesses often attract a low multiple because the risk is high and day-to-day operations depend on the owner.

3. Discounted Cash Flow (DCF)

Future cash flows are discounted to their present value. More precise, but sensitive to assumptions.

What increases the price?

• Recurring revenue (subscriptions, ongoing contracts).
• Independence from the owner.
• Clean accounts and documented processes.
• A diversified customer base.

Tax when selling

In Denmark, gains on the sale of shares in a private limited company are taxed as share income — unless the shares are owned through a holding company. See holding companies — when do they make sense? and sell your company.

Frequently asked questions

Which method is best?

Often a combination — buyers and sellers typically agree on a price somewhere between net asset value and an earnings-based valuation.

Should I involve an accountant?

Yes, especially for normalising the accounts and calculating tax.

Can a loss-making company be sold?

Yes, but its value typically lies in its customers, contracts or technology.

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