Understanding business valuation. Orientation for sellers and buyers
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The question of a company's value is one of the most important in any succession. But how do you arrive at a realistic figure? This article gives you factual orientation for understanding valuation methods, figures from current studies and practical steps for sellers and buyers.
What do the figures say?
A recent study by the KfW provides insights into how business owners in Germany and Switzerland estimate the value of their companies. The findings are revealing:
The average target sale price for a mid-sized business in 2025 is around 499,000 euros. Half of all sellers set their expectations above 375,000 euros, the other half below. The gap between the average and this median value shows that a few very high price expectations at the top pull the average upward.
The comparison over time is interesting: since 2019, price expectations have risen by 34 per cent. Adjusted for inflation, this corresponds to an increase of 9.5 per cent. Sellers are therefore valuing their businesses genuinely higher than six years ago.
On average, sellers aim for 1.2 times their annual revenue as the purchase price. Roughly half set their target at around 60 per cent of annual revenue.
The study reaches a cautiously positive conclusion: the vast majority of mid-sized sellers do not set systematically inflated prices. However: there are outliers. And there are sellers who factor their emotional attachment into the price.
Valuation methods at a glance
If you want to calculate the value of a business, there are various methods to choose from. The most common for SME valuations are:
Asset value method
What is physically there? Machinery, property, inventory, vehicles. This method looks at the existing assets. It is straightforward, but it does not capture the true value of a running business, such as customer relationships, know-how or market position.Income value method
What profits will the business generate in the future? This method looks at future earning power. It is more realistic for buyers, but harder to calculate because it requires projections.Multiples
In many industries, there are common rules of thumb: the business is worth X times its annual revenue. Or Y times its EBITDA. These multiples are based on empirical values and actual sales completed in the respective industry.
Examples of industry-standard multiples (based on revenue):
Construction/Trades: 0.25 to 0.5 times annual revenue
Retail: 0.3 to 0.55 times
Consulting services: 0.56 to 1.03 times
Software/IT: 1.33 to 2.3 times
These ranges show: there is no one-size-fits-all solution. Every industry works differently. Every business is different.
Initial orientation: online calculators
If you want a first estimate, there are helpful tools available online:
For Germany:
The IHK business value calculator at www.rechner.uwd.de offers a digital starting point. You enter basic data and receive a rough orientation. There are also explanations of the most common valuation methods.
For Switzerland:
The official SME portal of the Federal Council at www.kmu.admin.ch explains the various valuation methods in a neutral and accessible way, without advertising and without hidden costs.
These tools do not replace a professional valuation. But they point in the right direction. And they help to identify unrealistic expectations.
When does a professional valuation make sense?
A neutral, professional business valuation can help when:
The expectations of seller and buyer are far apart
There is uncertainty about the realistic value
A bank requires a valuation for financing
Emotional attachment distorts the perspective
Important: a professional valuation costs money. But it creates a shared basis for discussion. It is not an absolute truth. But it is a well-founded orientation.
Some sellers hesitate to bring in external help. Because of the cost. Because they are worried about the result. Or because they fear the process will take too long. That is understandable. But: those who wait too long end up under time pressure. And time pressure rarely leads to good decisions.
What sellers should do
Start early
If you begin thinking about the value of your business at 58 or 60, you will have enough room to manoeuvre later. If you only start at 65 and urgently need to sell, you are under pressure.
Prepare your figures carefully
The last three to five financial years are particularly interesting for buyers. Up-to-date annual accounts, customer structure, supplier contracts. The better prepared you are, the more serious the first impression.
Get a realistic estimate
Online calculators provide initial orientation. If you are uncertain, a professional valuation helps. It costs money. But it protects against disappointment.
Communicate honestly
Honesty builds trust. Those who speak openly about strengths and weaknesses attract the right buyers. Those who set unrealistic prices scare them off.
What buyers should consider
Show respect
Handing over a business is an emotional process. Sellers deserve respect for the work of a lifetime, even if the price does not match.
Know your limits
What can you actually finance? Not just the purchase price. Also the ongoing operations. Also investments. Also reserves for difficult times.
Ask questions
Why this price? What is behind it? Often an honest conversation helps more than a rigid negotiation.
Use professional help
At some point you will need experts. Accountants, advisors, lawyers. But only when it is clear that you are fundamentally compatible.
The path to valuation
The question of business value does not come at the beginning. It comes when both sides have got to know each other. When it is clear: the chemistry is right. The expectations broadly align. It makes sense to go further.
Only then is the effort of a detailed valuation worthwhile. Only then does it make sense to bring in advisors. Only then do the negotiations about the purchase price begin.
BIZZqui makes exactly this first step possible. An app that connects buyers and sellers in a targeted way. Anonymously, until both are ready. With a chat room to say quickly: there is interest. Let us talk.
If both say after the conversation "yes, this could work", the next steps follow. The valuation. The advisors. The contracts.
But at the beginning, there is the encounter. Between people.
