How to Calculate a Business's Value, Step by Step

Several recognized methods exist for valuing a business, but for small and medium-sized businesses, the EBITDA multiple is the most used in practice — both because it's relatively simple to calculate, and because it's the method most buyers use themselves to assess a price.

Short answer: Find the business's normalized EBITDA, multiply it by an industry-adjusted multiple (typically 2–5x for smaller Danish businesses), and then adjust for customer dependency, owner dependency and growth. Want a quick estimate without working it out yourself? Use our free valuation tool.

Step 1: Find the business's EBITDA

EBITDA is earnings before interest, tax, depreciation and amortization — in other words, the business's genuine operating earnings. If the business has one-off items (e.g. a one-time revenue item, or an owner's salary that doesn't match market rate), they should be adjusted out, so you get a normalized EBITDA showing the underlying earnings.

Step 2: Find the right multiple

A multiple is a number the EBITDA is multiplied by, and it varies by industry, size and growth. As a rule of thumb, multiples for smaller Danish businesses typically fall between 2–5x EBITDA, while larger, well-run businesses with stable growth can achieve higher multiples. Use comparable sales in your industry as a reference point.

Step 3: Work through the example

Example: A business has a normalized EBITDA of DKK 800,000. Comparable businesses in the industry typically sell for 3–4x EBITDA. That gives an estimated value of between DKK 2,400,000 and DKK 3,200,000.

Step 4: Adjust for what the numbers don't capture

• Customer dependency: If a large share of revenue is tied to few customers, that pulls the multiple down.
• Owner dependency: Can the business run without you, or are you the key person? The more owner-dependent, the lower the multiple tends to be.
• Growth and recurring revenue: Stable, recurring earnings (e.g. subscriptions) are typically rewarded with a higher multiple than project-based revenue.
• Goodwill: Brand, reputation and customer relationships not directly reflected in the accounts can lift the price further. See our guide to goodwill in a business sale.

See it in practice: Our free sample valuation report shows what a finished calculation looks like for a fictional business (currently in Danish).

Step 5: Cross-check with the asset-based value

As a final check, it's worth looking at the business's asset-based value — the value of the assets minus debt. If the EBITDA multiple result is significantly lower than the asset-based value, that's a signal something in the calculation should be reconsidered. Read more about the difference in our full guide to business valuation.

When isn't the EBITDA multiple enough?

For businesses with highly fluctuating earnings, significant investment needs, or a completely different business model (e.g. early-stage growth businesses without a positive result), a discounted cash flow model (DCF) or the EVA model is often used instead, looking at the business's expected future cash flows or added value beyond the cost of capital. This typically requires professional help to do accurately.

Frequently asked questions

Can I calculate the value completely accurately myself?

You can get close with a simple EBITDA multiple calculation, but the final price is always set through negotiation and affected by factors that are hard to put a number on, like goodwill and negotiating position. See our free tool for a quick estimate.

Why do two businesses with the same EBITDA get different multiples?

Because the multiple is adjusted for risk: customer concentration, owner dependency, growth and industry all affect where in the 2–5x range a specific business lands.

Should I use normalized or reported EBITDA?

Always normalized EBITDA. Reported EBITDA can include one-off items and owner-specific expenses that give a misleading picture of the underlying earning power.

Want a quick estimate based on your own figures? Try our free valuation tool, or read more in our full guide to business valuation.