Revenue is not profit
Buyers rarely price a business on turnover. They look at earnings before interest, tax, depreciation and amortisation (EBITDA), or at owner earnings for smaller businesses where the owner is also the main manager.
Normalising earnings
Supported once-off costs can be added back, and the owner's pay is adjusted to a market-related replacement salary. Recurring expenses should not be added back simply to raise the figure; a buyer's due diligence will test every adjustment.
Why the same EBITDA can attract different offers
- Dependence on one or two customers
- How much the business relies on the owner
- Quality and consistency of financial records
- Growth trend over the last three years
- Contracts, licences and key staff that may not transfer easily
Enterprise value versus what you receive
The multiple produces an enterprise value. Debt is deducted, surplus cash is added and the price is adjusted against an agreed working-capital level to reach the equity value paid to the seller.
| Illustrative example (arithmetic only) | Amount |
|---|---|
| Maintainable EBITDA | R2m |
| Illustrative multiple | 4 |
| Enterprise value | R8m |
| Less debt | R1.5m |
| Plus surplus cash | R0.5m |
| Equity value, before other adjustments | R7m |
What a free calculator can and cannot tell you
Our free valuation gives an indicative range based on the information you enter. It is not a formal valuation, a buyer offer or a document for tax purposes.
Records to prepare before discussing a price
- Three years of annual financial statements
- Current management accounts
- Customer and supplier concentration figures
- Schedule of debt and other liabilities
- List of key contracts and staff
Common questions
Is turnover enough to value a business?
No. Buyers value sustainable earnings, then adjust for debt, cash, working capital and risk.
Can I add my salary back?
Your pay is replaced with a market-related salary for the role, so only the excess is added back.
Is the valuation the amount I receive?
Not necessarily. Debt, cash, working capital, tax and deal terms all affect your proceeds.
Why does owner dependence reduce value?
A buyer pays for earnings that continue after you leave. If the business relies on you, that continuity is less certain.
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Last updated October 2026. This guide is general information on South African regulatory procedure and is not legal advice on your specific matter. Dynamic Legal Services (Pty) Ltd is a private legal advisory firm and is not a government department or regulator.