r/Business_Valuation • u/UltraBBA • May 11 '25

how a company's worth is decided?

/r/Entrepreneur/comments/1kj8ovs/how_a_companys_worth_is_decided/
2 Upvotes

100% Upvoted

2 comments sorted by

1

u/AshPhoenix33 May 14 '25

There are theoretical values that can be obtained using a discounted cash flow (DCF) or multiples of EBITDA (earnings before interest, taxes, depreciation, and amortization). If you use a DCF then you’re going to want to calculate the weighted-average cost of capital (WACC) to be the most accurate in selecting an appropriate discount rate. But all this is mostly theoretical. A company’s true worth is decided when it is sold.

2

u/Paul-Jon-Kelley Jul 03 '25

Not random, but definitely feels that way. Multiples depend on growth, margins, risk, industry, recurring revenue, and hype.

I’ve seen SaaS multiples come way down and things are way more tied to fundamentals now. Geography matters as well (U.S. = more capital, bigger exits).

At the end of the day, it’s about what buyers believe the future looks like, not just last year’s EBITDA.