Start with the earnings: adjusted EBITDA
EBITDA means earnings before interest, taxes, depreciation and amortization. It is a commonly used earnings measure, but it is not cash flow and does not capture all capital expenditure or working-capital needs.
Adjusted EBITDA is a non-GAAP measure without one standardized definition. Adjustments aim to reflect sustainable operating earnings and can move the number up or down. Possible adjustments include documented nonrecurring items, owner compensation compared with market replacement cost, and personal expenses that the buyer would not incur. Buyers may reject adjustments or identify missing recurring costs; an add-back is not automatically accepted.
For many owners, the first honest look at adjusted EBITDA is a surprise in one direction or the other. Either the business earns more than the tax return suggests, or the earnings depend on the owner more than anyone wanted to admit. Both are worth knowing years before a sale.
Enterprise value is not your sale proceeds
In a typical cash-free, debt-free transaction, enterprise value is bridged to equity value by adding included cash and subtracting debt and agreed debt-like items, with negotiated working-capital and other contract adjustments. Fees, taxes, escrows and earn-outs can affect what an owner receives and when. The purchase agreement determines the actual bridge.
The multiplier: where the money is
An earnings multiple is one valuation method. The choice of method and multiple needs evidence. Market-comparison, income-based and asset-based approaches may be relevant depending on the business and purpose of the valuation.
Companies with similar earnings can command different values because their growth prospects, risks, assets and terms differ. Comparable transactions need to be assessed for those differences, rather than treated as a guaranteed price.
What can support the multiplier
- A management team that runs the company without the owner
- Financial reporting a buyer can trust on first read
- Customers spread across many accounts, with relationships the company holds
- Revenue that repeats: service agreements, maintenance contracts, reorders
- Documented systems, so the company runs on process
- Room to grow that a buyer can see and believe
What can reduce it
- Owner dependence in sales, operations, or key relationships
- Books that need explaining
- Heavy reliance on one customer; the significance depends on the business
- Know-how that lives in a few heads and nowhere else
Value has to transfer to count
MVA’s advisory principle is that transferable value matters. Personal customer relationships, estimating skills, supplier terms and reputation can create transition risk. Buyers may assess that risk through diligence, retention arrangements or deal terms. Documented systems and capable teams can help the business continue through a change of ownership.
What that can look like in practice
Consider a hypothetical service business whose owner holds key customer relationships and makes most operating decisions. Developing team responsibilities, documenting processes and improving reporting could make the transition easier for a buyer. The value effect still depends on the results, retention risks and the terms of the deal. This is an illustration, not a reported client outcome.
Set the number years before the sale
Start planning early enough to address reporting, management and customer risks. Some improvements take substantial time. Early preparation can increase your options, but the eventual price and terms also depend on the buyer, financing and market at the time of the deal.
MVA starts with an assessment of the business, an estimate of current value and potential-value scenarios tied to proposed improvements. The roadmap helps prioritize work and test assumptions. Neither an assessment nor a completed project guarantees a buyer will pay more.
If you would rather grow than sell, start with How do I grow by acquisition? and When should I buy another company? The same preparation can inform both decisions.
Sources and further reading
Reviewed October 8, 2026. The recommendations above are MVA’s advisory framework; the sources below support the financial definitions and transaction context.
