What Is Enterprise Value?
The number every buyer starts from — in plain English, and why it's the floor of the conversation, not the ceiling.
- Enterprise value is the price for the business itself — before you settle up cash and debt.
- It's not your bank balance and it's not what lands in your account. Those are different numbers, and mixing them up costs founders real money.
- Every rule of thumb — 3× revenue, 8× profit — is a comp in disguise. It describes the average company, not yours.
- The honest number comes from the one buyer who can't lose you, not from a benchmark.
Every buyer starts the conversation with one number: enterprise value. Get it wrong in your head and you'll either scare off the right buyer or sign for less than the deal was worth. So let's make it plain.
Enterprise value, or EV, is what the whole business is worth to a buyer — the operating company itself, before anyone accounts for the cash sitting in the bank or the debt on the books. Think of it as the price of the house, not the price after you pay off the mortgage and pocket what's in the safe.
What's “enterprise value”?
Enterprise value (EV) is what the whole business is worth to a buyer — the price for the company itself, before cash and debt.
Rules of thumb are just comps in disguise — they tell you where the average business lands, not yours. The real number comes out of the honest valuation.
The reason EV matters is that it's the number both sides negotiate. Everything else — what actually hits your account — is arithmetic you do afterward. Here are the pieces that turn EV into your cheque:
- Enterprise value (EV)
- What the business is worth on its own — the price for the engine, before cash and debt are settled.
- Equity value
- What the shares are worth — enterprise value, plus the cash in the business, minus its debt.
- Net debt
- Debt minus cash. Positive net debt shrinks your cheque; a cash pile grows it.
- EBITDA
- Earnings before interest, tax, depreciation and amortisation — a rough proxy for the cash the business throws off.
So the chain is simple: start at enterprise value, add the cash, subtract the debt, and you land on equity value — the number the shareholders split. A founder who hears “we'll pay ten” and assumes ten lands in the bank is reading the wrong line.
A multiple tells you what the average company fetched. It says nothing about the buyer who'd pay more because they can't afford to lose you.
Which brings us to the part the banks won't say out loud. Enterprise value gets pitched to you as a formula — take your profit, apply the sector multiple, there's your worth. That's comps dressed up as maths. Comps are just the average of what other founders settled for, some tired, some under pressure, some without the right buyer in the room.
Your enterprise value isn't an average. It's the floor of a conversation, not the ceiling. The rules of thumb tell you where the middle of the market lands. The real number comes out of one thing: the buyer who can't build what you built and can't stand to let a rival own it. Finding that buyer — not benchmarking you against strangers — is the actual job.
Want to know what your business is actually worth — and to whom?
That's the whole idea behind how we work. Everything else — the software, the buyer map, the year of warm-up — exists to turn a formula into the honest number for you specifically.