If you are considering selling your business, chances are you already have a number in mind. However, at the end of the day, what your business is worth is what a buyer is willing to pay – and what a seller is willing to accept.

That’s why one of the first things Osage does when we meet with a new client is talk value. We look at financial statements, industry trends, sales, revenues, and profitability. Once we come to a reasonable agreement of value based on the current market, we can move forward together.

Setting expectations.

Often a new client says, “My buddy sold his company for $15 million, or $20 million, or $30 million, and so my company must be worth the same.” But every company and every industry has its own nuances. For example, what kind of business did your friend have? If your friend owns a software company and you own a manufacturing company, that’s like comparing apples to oranges. Osage encourages a very open, honest and transparent conversation that covers perceived value, market value, and the current climate.

Determining value.

Most businesses are valued based on a multiple of earnings before interest, taxes, and amortization (EBITDA). In fact, 95 percent of the deals that we work on are based on some multiple of EBITDA. On occasion, we look at the asset value of the business, especially when it comes those that have a significant amount of intellectual property (IP) such as bioscience and pharmaceutical companies whose patents have greater long-term value vs. current profitability.

Human capital.

We’ve written about human capital here before, and it is a critical piece of the valuation process..  Often, top employees are a central part of your organization that a new owner will look to retain as a key factor in closing the transaction.

In addition, although you, the owner, may be ready to sell, if the business is heavily reliant on your leadership, the buyer may need you to stay on for a few years to help with the transition process including handing off strategic relationships. If fact, the sale could be contingent upon it.

Another important aspect in evaluating a business’s management team is considering any holes in personnel: No CFO? No lead salesperson? No general manager?  If a buyer is going to have to fill those gaps, that will cost money and will impact the overall value of your company.


How are your revenues derived? Are they project-based, repeat business or recurring? Buyers will typically place a lower value on project-based work because it’s not continual. If your business has repeat customers with a long track record of doing business (for example, a manufacturing company that continuously receives orders over the course of a year), buyers will place a higher value for the business. Likewise, if your revenues are truly recurring where customers pay a monthly, quarterly or annual subscription fee to use your products – like software – then buyers will likely place the higher value since future revenues are more predictable.

Profitability and margins.

The more detail you can provide regarding your company’s profitability the better. You should be able to drill down to margins by product line or SKU. Buyers are going to want to know these metrics in as much detail as possible. This is a key performance indicator (KPI) in understanding the margin profile of your business. Having this information easily accessible to a buyer will likely increase value.

You can learn more details about setting a value on your company and hear first-hand scenarios from Osage’s years of experience by listening in to our podcast or by watching our NEW YouTube Channel.