When buyers evaluate a business for acquisition, valuation becomes the foundation of decision-making. Understanding the techniques they use can empower sellers to better prepare and defend their asking price.

1. EBITDA Multiples (Earnings Before Interest, Taxes, Depreciation, and Amortization)
This is the most common method for small to mid-market deals. Buyers apply a multiple (often between 3x to 7x, depending on the industry, growth rate, and risk) to the normalized EBITDA to estimate enterprise value. Strategic buyers may pay a premium, while financial buyers stick closer to industry norms.

2. Discounted Cash Flow (DCF) Analysis
This method projects future cash flows and discounts them back to present value using a required rate of return. It’s popular in more sophisticated transactions where predictable, high-margin cash flow is present. DCF reveals the intrinsic value of a business based on performance expectations.

3. Comparable Transactions Analysis
Buyers look at recent sales of similar companies to determine what the market is willing to pay. This market-based approach helps validate valuation ranges and set pricing benchmarks.

4. Precedent Public Comparables
For larger deals or those with public market overlap, buyers may assess valuation using publicly traded companies with similar financial metrics and business models.

5. Asset-Based Valuation
Used in distressed or asset-heavy businesses, this method values the company based on the net asset value, rather than earnings.

Each method reveals a different angle of value—savvy buyers triangulate them. As a seller, understanding these techniques helps you prepare, negotiate, and ultimately capture the value your business truly deserves.