Company valuation: how to determine the true value of your business

Understand the strategic role of valuation and how it impacts the decisions of investors and business owners

Knowing the true value of a company is not merely a bureaucratic step or a market curiosity — it is strategic information that can define the future of a business. Valuation is the technical and financial process used to estimate the economic value of a company based on financial data, projections, risks, and future opportunities.

Whether to raise capital, attract partners, sell the business, or restructure operations, a well-executed valuation is essential for making secure, well-founded, and fair decisions. Leading companies use this tool to support growth strategies and maximize value for stakeholders.

What is valuation and why does it matter?

Valuation is the process of estimating a company’s value using globally recognized methodologies. Contrary to popular belief, there is no single “true value” for a company — there are estimates that vary depending on the assumptions used and the purpose of the valuation. Among the most common approaches are:

• Economic value: based on the company’s ability to generate future cash flows (the most technical and structured method)
• Market value: what the market would be willing to pay, influenced by perception and timing
• Book value: net equity recorded on the balance sheet (often not representative of modern businesses)

To understand the true value of a business, it is necessary to analyze the company as a living organism, constantly evolving, and not merely as a spreadsheet of assets and liabilities.

When should a valuation be performed?

Although valuation should ideally be monitored periodically by all companies, there are moments when it becomes critical.

• Capital raising (venture capital, private equity, etc.)
• Mergers, acquisitions, and sale of equity stakes
• Succession planning and corporate reorganization
• Corporate governance structuring
• Share pricing in IPO processes or reorganizations
• Legal disputes between partners or heirs
• Market entry decisions or spin-off evaluations

Valuation methodologies – a strategic choice

There is no single definitive method. The choice depends on the industry, the company’s maturity, data availability, and the purpose of the valuation. The main methods include:

1. Discounted Cash Flow (DCF): the most widely accepted approach in M&A and private equity transactions. It estimates the present value of future cash flows the company is expected to generate, discounted by a rate that reflects business risk. It requires deep business understanding, scenario analysis, robust financial assumptions, and strong technical expertise.
2. Market multiples: compares the company to peers of similar size and industry using indicators such as EV/EBITDA, P/E, EV/Sales, among others. Useful as a complementary method, especially for validating results. It requires access to reliable databases and critical analysis of comparability.
3. Book or liquidation value: calculates value based on the company’s net assets. Used in specific situations such as distressed companies, asset-holding entities, or legal proceedings.
4. Real options valuation: applied to innovative or technology-driven companies with high uncertainty. It allows the valuation of future opportunities, such as new products or market expansion.

Key indicators for a strategic valuation

To build and interpret a valuation in depth, it is essential to analyze the main value drivers:

• EBITDA and EBITDA margin: demonstrate operational cash generation capacity
  ROIC (Return on Invested Capital): compares returns to the cost of capital
• WACC (Weighted Average Cost of Capital): essential for discounting cash flows
• Projected growth (CAGR): assesses business scalability
• Operational, financial, and market risks: directly impact valuation

Cost of valuation – an investment with strategic return

The value of a high-quality valuation is more related to depth and customization than to company size. Common pricing models include:

• Fixed fee: ideal for clear and objective scopes (company sale, partner entry, etc.)
• Phase-based fees: suitable for lengthy processes or those requiring steps such as due diligence, scenario analysis, audits, etc.
• Valuation as part of M&A or fundraising packages: embedded in project costs and often linked to success

How to choose the right partner

Valuation is both science and art. Therefore, choosing the firm that will conduct the process is decisive:

• Proven experience in M&A and valuation
• Deep industry expertise
• Ability to analyze risks and future scenarios
• Multidisciplinary team (finance, strategy, accounting, legal)
• Credibility with investors and auditors

Upside Investment delivers comprehensive valuation and strategic advisory solutions for companies in growth stages, transactions, and restructuring processes. Our international presence allows us to offer a technical, global, and customized perspective.

Valuation is not just a number. It is a reflection of your strategy, your performance, and your potential.

Find out how much your company is worth — and how much it can be worth tomorrow. Get in touch.