How Much Is My Business Worth? | Valuation Guide | Launch Capital

The short answer: "How much is my business worth?" is the first question almost every owner asks, and the honest answer is a range, not a number. A business is worth what an informed buyer will pay for its future earnings and risk. This guide explains how that range is built, so you can arrive at a sale with realistic expectations.

The three valuation approaches

Professional valuators use three main approaches, and often blend them.

• Market approach: compares your company with similar businesses that sold recently. Best for most operating businesses with enough comparable deals.
• Income approach: estimates value from the earnings the business is expected to produce. Best for profitable, stable businesses.
• Asset-based approach: adds up what the assets are worth and subtracts liabilities. Best for asset-heavy or struggling businesses.

A simple income example: if a business earns $100,000 a year and a buyer wants a 20% return, the business is worth about $500,000 ($100,000 ÷ 0.20). Real valuations are more detailed, but the logic is the same. The riskier the earnings, the higher the return a buyer demands, and the lower the price.

Step 1: Recast your earnings

Buyers do not pay for the profit on your tax return. They pay for the profit a new owner would earn. To get that number, you adjust, or "recast", your financials by removing:

• Discretionary owner spending, such as personal vehicles, travel and family members on payroll above market rate
• One-time costs and unusual income
• Personal bills paid through the company

You may also need to add a market salary for the job you do. If you work 60 hours a week and pay yourself $40,000, a buyer will have to replace you at a realistic cost. The result is your adjusted earnings. The two common measures are seller's discretionary earnings (SDE), used for smaller owner-operated businesses, and adjusted EBITDA, used as companies grow and have management in place.

Step 2: Apply a multiple

Value is usually quoted as a multiple of adjusted earnings. For Canadian lower-middle-market companies, one advisory firm reports typical EBITDA multiples of 4x to 6x, with premium businesses reaching 7x or higher in 2026. Treat that as a rough guide from a single source, not a promise. Multiples vary widely by industry, size and growth.

What moves your multiple up or down:

• Growth. A business with rising, predictable revenue commands more.
• Recurring revenue. Subscriptions and long contracts are worth more than one-off projects.
• Customer spread. When one customer is a large share of revenue, buyers discount for the risk.
• Owner dependence. If the company cannot run without you, buyers pay less.
• Quality of records. Clean, reviewed financials build trust and speed up diligence.
• Size. Larger companies generally sell at higher multiples than very small ones.

Step 3: Sense-check against the market

A formula gives you a starting point. The market gives you the answer. Ask an M&A advisor which comparable businesses have sold and on what terms. Two buyers can value the same company differently, because a strategic buyer who can cut costs or cross-sell may pay more than a financial buyer.

Why price is more than one number

The headline price is only part of what you receive. Deal terms change the real value:

1. Cash at closing versus deferred payments. An earn-out or seller note is worth less than cash today.
2. Working capital adjustments. The final price may move based on the company's working capital at closing.
3. Taxes. How the sale is structured affects what you keep. Read tax on selling a business in Canada.

When to get a formal valuation

A rough estimate is fine for early planning. Get a formal valuation from a qualified professional when you are within a year or two of selling, when you need a figure for tax planning or a shareholder agreement, or when you want an independent check on a buyer's offer. A good valuator will also tell you what to fix to increase the number.

The practical takeaway

The fastest way to raise your valuation is to raise the quality of the business: steadier revenue, a broader customer base and a team that can run without you. Those changes take time, which is another reason to start early. Our guide to how to sell a business in Canada shows where valuation fits in the process.

Want to talk about value?

Launch Capital is a Toronto venture capital firm and family office focused on technology and services businesses. If you run a Canadian technology or services business and want to talk about value, a minority investment or growth capital, contact us.

This article is general information, not legal, tax or financial advice. A formal valuation requires a qualified professional.