How Do You Value a Business that Isn_t Publicly Traded

Jake Claver

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00:00How do you value a business that's not publicly traded?

00:02Most people, when they take their business to go sell it, they use EBITDA or SDE.

00:06EBITDA is earnings before interest, tax, depreciation, or amortization,

00:11which basically means the profit before the majority of the expenses come out.

00:14And then also you have SDE, which is seller's discretionary earnings.

00:18So this is where you take all the expenses that the owner took out of the business

00:21and add it back to the revenue so that you can get an accurate valuation for the business.

00:25And then you'll multiply it by whatever the multiple for that industry is across standards.

00:29Basically look at all the other people that have sold their business,

00:31aggregate those numbers, and then find the average or the multiple above what the EBITDA was.

00:35And that's what you use to value your business when you take it to market.

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