How to Value a Company for Sale: 3 Methods + Common Mistakes to Avoid
When it comes to valuing a company for sale, you’ll encounter three primary methods: Discounted Cash Flow (DCF), Comparable Companies, and Precedent Transactions. But here’s the catch — just knowing these methods isn’t enough. An accurate valuation reveals your company’s true market value — the value that potential buyers will agree on. And this insight is crucial because it helps you decide whether now is the right time to sell or if you should work on increasing your company’s value.
In this guide, we’ll cover:
3 methods to value a company (and how to use them)
Common mistakes to avoid
How an M&A advisor can help you get the best value for your business
Discounted Cash Flow (DCF) Analysis DCF analysis estimates your company’s value by forecasting future cash flows and discounting them to present value. It’s a great tool for understanding long-term potential, but it’s only one part of the equation. Don’t forget to factor in market sentiment and buyer demand.