How to Value a Small Business — Valuation Methods Explained

Valuing a small business requires combining robust mathematical modeling with market reality. The two most common and effective methodologies are Discounted Cash Flow (DCF) and Market Multiples.

Discounted Cash Flow forecasts future free cash flows to the firm over a multi-year horizon and discounts them back to present value using a Weighted Average Cost of Capital (WACC). This captures the intrinsic earning power and capital requirements of the company.

Market Multiples benchmark the company against recent transactions and public peers using multiples such as Enterprise Value to EBITDA or EV to Revenue. Multiples reflect current market appetite, sector sentiment, and buyer liquidity.

ExitVelocity runs both models simultaneously and pairs them with AI synthesis to explain the valuation range, highlight sensitivity levers, and provide actionable negotiation context.