How to Value Your Business in India

Understanding business valuation methods, industry multiples, and what drives your company's worth.

Common Valuation Methods for SMBs

1. EBITDA Multiple Method (Most Common)

Formula: Business Value = EBITDA × Multiple

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) represents your business's operating profit. This is the most common method for valuing profitable, established businesses.

Typical Multiples in India:

  • • Manufacturing: 2-4x EBITDA
  • • Retail/Wholesale: 1.5-3x EBITDA
  • • Service Businesses: 1-3x EBITDA
  • • E-commerce/SaaS: 2-5x EBITDA
  • • Restaurants: 1.5-2.5x EBITDA

2. SDE Multiple Method (Owner-Operated Businesses)

Formula: Business Value = SDE × Multiple

SDE (Seller's Discretionary Earnings) includes EBITDA plus owner salary, personal expenses, and one-time costs. This method is better for small, owner-operated businesses where the owner draws salary and benefits.

3. Asset-Based Valuation

For businesses with significant physical assets (manufacturing, real estate), valuation includes the market value of equipment, inventory, property, and goodwill. Useful when profits are low but assets are valuable.

What Affects Your Multiple?

Higher Multiples 📈

  • ✓ Consistent revenue growth
  • ✓ Diversified customer base
  • ✓ Recurring revenue model
  • ✓ Low owner dependency
  • ✓ Strong management team
  • ✓ Clean financials
  • ✓ Scalable systems

Lower Multiples 📉

  • ✗ Declining revenue
  • ✗ Customer concentration (1 customer = 30%+)
  • ✗ One-time projects
  • ✗ Owner does everything
  • ✗ No documentation
  • ✗ Cash transactions
  • ✗ Outdated technology

Example Valuation

Manufacturing Business in Pune

Annual Revenue: ₹3.5 crore

EBITDA: ₹70 lakh

Industry Multiple: 3x (strong growth, diversified customers)

Estimated Value: ₹2.1 crore

(This is a simplified example. Actual valuation considers many more factors.)

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