| Capitalisation of earnings |
Sustainable annual profit, capitalised |
Three years of financials, add-back detail |
2.0×–7.0× EBITDA |
Assumes the future resembles a normalised past |
| Discounted cash flow |
Present value of forecast free cash flow |
A defensible 3–5 year forecast |
Sensitive to the discount rate |
Highly sensitive to forecast and terminal assumptions |
| Market comparables |
What similar businesses actually sold for |
Revenue, EBITDA, sector, size |
0.5×–3.0× revenue |
Private deal data is thin and terms are rarely disclosed |
| Net asset backing |
Fair value of assets less liabilities |
Asset register, leases, stock count |
Net assets + goodwill |
Ignores earning capacity above the asset base |
| Rule of thumb multiples |
Sector shorthand, used only as a sanity check |
Revenue or a physical unit measure |
Sector specific |
Never sufficient on its own for tax or court purposes |
| Early-stage methods |
Risk-adjusted potential rather than history |
Model, cap table, market size |
Wide by nature |
Depends heavily on the credibility of the plan |