What is your company really worth?

Most owners carry a figure in their head: a multiple a friend received, a number a banker mentioned at dinner, the sum they need to feel the years were worth it. None of these is a valuation. A valuation is a reasoned argument about what a specific buyer, in a specific market, will pay for a specific stream of future cash flows.

Three questions decide that argument. First, how durable are the earnings? A business whose revenue depends on the founder’s relationships, or on two customers, is worth less than its accounts suggest. Second, how clean are the numbers? Normalised earnings, adjusted for one-off costs, owner compensation and related-party arrangements, are what a buyer will underwrite, and every adjustment must be defensible. Third, who is the buyer? A strategic acquirer pays for synergies; a financial buyer pays for cash flow and a credible exit; a family successor pays for continuity.

The useful exercise is to value the company the way the other side will, before they do. That means building the quality-of-earnings view, stress-testing the forecast, and identifying the two or three issues that will be used to discount the price, then deciding which to fix and which to explain.

Done twelve to twenty-four months before any transaction, an independent valuation changes the conversation. It turns a negotiation over a number into a discussion of evidence, and it gives the owner time to move the value drivers that matter.