What Is My Company Worth? A Mid-Market Valuation Primer

Many business owners postpone valuation until a buyer approaches or a succession event forces the question. This is a strategic mistake. Understanding your company's value early gives you control over timing, positioning, and the negotiation itself.

A valuation conducted 12 to 18 months before a planned exit serves multiple purposes:

• Identifies value gaps: Where is your business underperforming relative to peers? Are there operational improvements that could lift your multiple before going to market?
• Strengthens negotiating power: Owners who know their numbers command better terms. Buyers respect sellers who can articulate the basis of their asking price.
• Sets realistic expectations: The most common reason deals collapse is a mismatch between seller expectations and buyer willingness to pay. An independent valuation bridges this gap early.
• Enables scenario planning: Should you sell 100% now, retain a minority stake, or pursue a management buyout? Each path has different valuation implications.

In the mid-market, where transaction values typically range from EUR 5 million to EUR 250 million, a 0.5x difference in the applied multiple can mean millions in deal value. Preparation is not a luxury, it is a direct driver of outcome.

Professional valuations in the mid-market typically rely on three approaches, often used in combination to triangulate a credible range.

1. Discounted Cash Flow (DCF)

The DCF method values a business based on the present value of its expected future cash flows. It requires forecasting revenues, margins, and capital expenditures over a projection period (typically five years), then discounting those cash flows back to today using a weighted average cost of capital (WACC).

When it works best: Companies with predictable, recurring cash flows and a clear growth trajectory. Common in software, subscription-based businesses, and stable services companies.

Key challenge: DCF is highly sensitive to assumptions. A small change in the discount rate or terminal growth rate can shift the valuation by 20% or more. Buyers and sellers often arrive at different DCF outputs because they use different assumptions.

2. Comparable Transactions

This approach benchmarks your company against recent M&A transactions involving similar businesses. If a competitor in your sector sold for 7x EBITDA, that provides a reference point for your own valuation.

When it works best: Sectors with sufficient transaction activity to build a meaningful data set. Works well in business services, healthcare, and industrial technology.

Key challenge: No two deals are identical. Differences in size, geography, growth rates, and deal structure can make comparisons misleading if not carefully adjusted.

3. EBITDA Multiples

The most widely used method in mid-market M&A. A valuation multiple (typically Enterprise Value / EBITDA) is applied to the company's normalised earnings. Normalisation adjusts for one-off items, owner compensation above market rates, and non-recurring costs.

When it works best: Nearly all mid-market transactions. EBITDA multiples are the common language between buyers, sellers, and advisors.

Key challenge: The multiple itself is just a starting point. What matters is which EBITDA figure is used (trailing, forward, or adjusted) and how normalisation adjustments are applied. An extra EUR 500,000 in EBITDA adjustments at a 7x multiple adds EUR 3.5 million in enterprise value.

In practice, experienced advisors use all three methods and present a valuation range rather than a single number, giving sellers a realistic corridor for negotiations.

Two companies in the same sector with the same revenue can have vastly different valuations. The difference lies in value drivers, the qualitative and quantitative factors that make a business more or less attractive to buyers.

Factors that increase value

• Recurring revenue: Subscription models, long-term contracts, and repeat purchase patterns significantly reduce buyer risk and command higher multiples.
• Low customer concentration: If no single client accounts for more than 10-15% of revenue, the business is more resilient and more attractive.
• Strong management team: Buyers pay a premium for businesses that can operate independently of the founder. A capable second tier of leadership signals continuity.
• Scalable operations: Can the business grow without proportionally increasing costs? Scalability is one of the most powerful multiple expanders.
• Defensible market position: Proprietary technology, regulatory moats, strong brand recognition, or deep customer switching costs all protect margins and justify premium pricing.

Factors that destroy value

• Owner dependency: If the business cannot function without the founder, buyers see a concentration risk that depresses the multiple, often substantially.
• Undocumented processes: Companies without formal SOPs, financial reporting standards, or documented workflows are harder to integrate and therefore less valuable.
• Legal or tax liabilities: Unresolved disputes, pending litigation, or aggressive tax positions create contingent risks that buyers will either discount or walk away from.
• Declining margins: Even with stable revenue, shrinking profitability signals competitive pressure or operational inefficiency.
• Deferred capital expenditure: Equipment, technology, or infrastructure that has been underinvested in creates a hidden cost that buyers will deduct from their offer.

The takeaway: Value creation starts long before a transaction. Business owners who systematically address these factors over 12 to 24 months can meaningfully increase their exit value.

A professional valuation is a structured, evidence-based process. Knowing what to expect and what to prepare helps you get a more accurate result and a smoother advisory engagement.

What to prepare

• Three to five years of audited financials: Profit and loss statements, balance sheets, and cash flow statements. The more transparent your financials, the more credible the valuation.
• Management accounts and KPIs: Monthly or quarterly data showing revenue trends, margin development, customer metrics, and pipeline figures.
• Normalisation items: A clear list of one-off expenses, above-market owner compensation, related-party transactions, and any other items that should be adjusted to reflect the true earning power of the business.
• Business plan or forecast: A realistic three-to-five-year projection that supports the growth assumptions used in a DCF or forward-looking multiple.
• Ownership and legal structure: Shareholder agreements, corporate structure charts, and any encumbrances or commitments that affect transferability.

What to expect from the process

A typical mid-market valuation engagement involves:

• Kick-off and data collection: The advisor reviews your financials, interviews management, and gathers sector benchmarks.
• Analysis and modelling: Application of DCF, comparables, and multiples methodologies. The advisor builds scenarios (base, upside, downside) to define a valuation range.
• Report and discussion: A written valuation report with a clear methodology section, key assumptions, and a reasoned conclusion. This becomes a reference document throughout the transaction.

How valuation fits into the bigger picture

For sellers, a valuation is not an endpoint but a strategic starting point. It informs decisions about timing, deal structure, buyer targeting, and negotiation strategy. For succession planning, it provides the financial foundation for family discussions, tax planning, and transition design.

The most successful exits we advise share one trait: the owner engaged early, understood their value, and used that knowledge to shape the process rather than react to it.