Company Valuation: Methods, Occasions and What Drives Value

A company valuation answers a seemingly simple question — what is a company worth? — in three very different ways. And none of them gives the price.

This guide frames when a valuation is needed, which methods exist, what really drives value, and why the formula is only the beginning. The individual topics are deepened in the linked articles.

When a company valuation is needed

A valuation does not only stand at the start of a sale. It is also relevant for succession planning, the entry of a shareholder or investor, inheritance and gifts, shareholder disputes or for financing. The occasion co-determines which method and which standard are appropriate.

For the owner thinking about a sale or handover: the valuation comes at the beginning, not the end. It tells you whether a buyer's idea is realistic.

The three valuation logics

At their core there are three ways to value a company. The asset value asks what the company owns. The earnings value and the DCF method ask what it will earn in the future. The multiples method asks what the market pays for comparable businesses.

No sound process relies on a single method — you approach from several sides and check whether the results fit together. How the methods work in detail and where each reaches its limit is explained in "What is my company worth? Valuation methods at a glance".

Industry multiples as a reality check

In practice, the EBITDA multiple is the quickest yardstick: earnings before interest, taxes, depreciation and amortisation, multiplied by an industry-typical factor. The ranges differ considerably by industry — where yours sits and how to read the table correctly is shown in "EBITDA multiples by industry". A multiple is a reality check, not a price tag.

What drives value — the value drivers

Within each range, the value drivers decide where you land: the quality of revenue (recurring rather than project-based), growth, scalability and, above all, dependence on the owner. Which of these levers pay off most before a sale is shown in "Increasing company value".

Value is not price

This is the biggest misunderstanding: a valuation calculates a value, but not the price. The price arises when a concrete buyer has a concrete reason to pay more than the average — and when several interested parties compete. The real value is secured not by the formula but by the negotiation.

Online calculators versus a real assessment

An online calculator gives a rough orientation, no more. It knows neither the quality of your revenue nor the current buyer interest in your industry. The false precision of an instant figure does not replace a sound, market-based assessment by someone who knows the transaction market.

The real value is created in the negotiation, not in the formula. For a realistic, independent assessment: IGCP Capital Partners. → igcp.at

Frequently Asked Questions

What methods of company valuation are there?

The three established logics are the asset value (what the company owns), the earnings value or DCF method (what it will earn in the future) and the multiples method (what the market pays). In practice they are combined and the plausibility of the results is checked.

How is company value calculated?

It varies by method: via the assets, via discounted future earnings, or via a multiple of profit such as the EBITDA multiple. What matters is a normalised result and the deduction of net financial debt to move from enterprise value to the value of equity.

What is my company worth?

It depends on earning power, industry, growth and owner dependency — and on what a buyer is strategically willing to pay. A sound estimate combines several methods with a look at current industry multiples and your company's value drivers.

When should I have a company valuation carried out?

Ideally before concrete steps are due — ahead of a sale, a succession or the entry of an investor. An early valuation shows where you stand and reveals the value drivers you can still work on before a transaction.