1. Rebuilding EBITDA
Net profit + income taxes + interest + depreciation + amortization. It is the result before capital-structure decisions and taxes.
Financial expense for the year.
Optional — used to calculate the EBITDA margin.
2. Multiple and adjustments
The multiple is the market reference for the sector. Net debt (debt − cash) determines what is left for the owner.
E.g. 4x–6x in retail, 8x+ in established SaaS.
Loans, financing, and bonds.
3. What it is worth
Enterprise value is what the operation is worth. Equity value is what is left for the owner after paying debt. If net debt exceeds EV, equity goes negative — the company is worth less than it owes.
How to read your valuation
Three fictional scenarios so you can practice reading the results before looking at your own numbers.
- What to look at
- EBITDA margin above 20% and equity value well above net debt.
- What it means
- The operation generates strong cash and leaves meaningful value for the owner after debt — a comfortable negotiating position.
- Next steps
- Document contracts, indicators, and processes: buyers pay a higher multiple for an auditable business.
- What to look at
- EBITDA margin between 8% and 20%, with equity value positive but close to EV.
- What it means
- There is value, but much of it is consumed by debt. The sector multiple may not apply until you improve the margin.
- Next steps
- Attack variable costs and SG&A before selling or raising capital; each margin point moves EV a lot through the multiple.
- What to look at
- Negative equity value, low EBITDA, or net debt above EV.
- What it means
- The company is worth less than it owes — selling today would transfer debt, not equity.
- Next steps
- Restructure debt (term/cost), cut operations that generate no EBITDA, and reopen valuation talks only after 2–3 healthy quarters.
Did I really understand the traffic light?
3 quick questions based on the guide above. Answer and see the correct answers right away.
- 1EV = $5M, debt = $2M, cash = $500K. What is the Equity Value?
- 2What does a 25% EBITDA margin usually signal in a valuation?
- 3Equity Value came out negative. What is the next step most aligned with the guide?
Chapter 12 — What your company is worth
In the book I show how to pick your industry multiple and what real investors look at before closing.
Buy the book →