Knowing what your business is worth is essential in many situations: selling the company, attracting an investor, dividing assets in a partnership dispute, securing a loan, or planning succession. Business valuation is, however, more art than science — different methods can produce very different results. This article walks you through the four most commonly used approaches.
The Multiples Method (Comparable Companies)
The quickest and most widely used method is valuation based on market multiples. You multiply a key financial indicator of your company by a multiple that reflects what investors pay for similar businesses.
The most popular multiple is EV/EBITDA (Enterprise Value divided by earnings before interest, taxes, depreciation and amortisation). Typical ranges on the Polish market:
- Retail trade: 4–6×
- Industrial manufacturing: 5–8×
- IT / SaaS: 8–15×
- Professional services: 4–7×
Example: a manufacturing company with EBITDA of PLN 2,000,000 and a multiple of 6× → Enterprise Value = PLN 12,000,000. Subtract net debt from this figure to arrive at equity value.
DCF Method (Discounted Cash Flow)
The DCF method is theoretically the most precise but requires forecasting future free cash flows and determining a discount rate (WACC).
The formula for enterprise value:
- V = Σ [FCF_t / (1 + WACC)^t] + TV / (1 + WACC)^n
where FCF_t is the free cash flow in year t and TV (Terminal Value) is the residual value beyond the forecast horizon.
Example: a company generates PLN 500,000 per year in FCF, expected growth 3%/year, WACC 12%. Terminal value = 500,000 × 1.03 / (0.12 – 0.03) ≈ PLN 5,722,000.
The downside of DCF is its sensitivity to assumptions — a 1 percentage-point change in WACC can shift the result by 15–25%.
Book Value and Adjusted Net Asset Value
The book value method is based on the company's balance sheet: total assets minus liabilities = equity. It is simple but often undervalues companies with significant intangible assets (brand, know-how, customer relationships).
More useful is Adjusted Net Asset Value (NAV), where assets are restated at market value rather than historical cost.
Comparable Transactions Method
This involves analysing prices paid in actual M&A transactions in similar industries and size segments. In Poland, data sources include Fordata reports, Grant Thornton analyses, and KRS records of share transactions. The method works best when several comparable deals have closed within the last two to three years.
Which Method Is Right?
In practice, advisors and investors use multiple methods simultaneously and compare the results. If market multiples point to PLN 10 million and DCF gives PLN 8 million, negotiations typically converge somewhere in between. Key value drivers include a diversified client base, stable long-term contracts, a strong brand, and growth potential.
Online Valuation — Calculator for Business Owners
Our company valuation calculator lets you estimate your business value using both the multiples and DCF approaches. Enter your EBITDA, revenue, debt level, and industry — and the calculator will produce an indicative value range comparing both methods.
Keep in mind that any serious transaction should involve a certified valuer or M&A advisor — particularly for deals above PLN 1 million.