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How to value a business: methods and advice
Are you considering taking over a business or selling your business after years of investment? Knowing how to value a business is a crucial step that neither the seller nor the buyer can afford to take lightly. An incorrectly set price will scare off serious buyers or disadvantage the seller.
To carry out this valuation successfully, you need to methodically analyse the components of the business, cross-reference several recognised calculation methods and weigh up the result against qualitative criteria that are often decisive. This comprehensive guide provides you with the keys to valuing a business, whatever your sector of activity.
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🕐 6 min of reading | Published on: 06/02/2026
Valuing a business: assets and components to be valued
Before applying any formula to value a business, it is necessary to draw up a comprehensive inventory of what the business comprises. Two main categories of assets come into play.
Intangible assets: customer base, leasehold rights, trade name and trademarks
The majority of a business’s value is based on intangible elements:
- The customer base and goodwill: this is the heart of the business. Without a regular or passing trade, the business has no legal existence.
- The leasehold right (DAB): the right to occupy the premises and benefit from the protective status of 3-6-9 leases. A rent below market rates significantly increases its value.
- The brand name and trade name: the local or national reputation associated with the establishment.
- Contracts and licences: operating rights essential to the business (IV licence, exclusivity agreements, patents).
Tangible assets: equipment, fixtures and fittings, and stock
Tangible assets form part of the overall valuation. They are valued at their current market value, not at their historical purchase price:
- Equipment and tools: machinery, IT systems, vehicles.
- Fixtures and fittings: commercial counters, shop fittings, display cabinets, cold rooms, work to bring premises up to standard.
- Stock of goods: this is inventoried during the valuation but is not generally included in the business valuation. It is purchased separately on the day of the final sale, following a joint inventory.
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The 4 methods for valuing a business
To arrive at a reliable valuation, experts never rely on a single formula. They combine four fundamental methods to ensure a consistent valuation of a business.
The industry-specific scale method (multiplier applied to turnover)
This is the traditional method, widely used by the tax authorities and estate agents. It involves applying a multiplier to the average annual turnover (including or excluding VAT, depending on the profession) for the last three financial years. This multiplier depends entirely on the sector of activity (see scale below).
Example: for a bakery with an annual turnover of €400,000, using a coefficient of 80%, the indicative value of the business would be €320,000.
The EBE or adjusted profit method
This method, favoured by banks, measures the business’s actual profitability. It is based on the Gross Operating Surplus (GOS), to which the valuer applies adjustments (re-adjustment of the director’s remuneration, exclusion of exceptional expenses). A multiplier coefficient, generally between 3 and 5, is then applied to this adjusted GOS.
The comparative method based on recent sales
Modelled on property valuation, this method involves analysing the local market by identifying recent transactions involving similar businesses (in terms of floor space, business activity and turnover) in the same geographical area. It is particularly useful for refining the results obtained by other methods when seeking to accurately value a business.
The asset-based method
Also known as the net asset method, this involves valuing each component of the business separately: the market value of the leasehold, the market value of the equipment, the customer base and the brands. It is ideal for businesses in difficulty or those whose operations have ceased.
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Valuation multipliers by sector
The following are the indicative scales commonly used to estimate the value of a business based on turnover. They vary significantly depending on the nature of the business.
Important note: these scales are provided for guidance only. They must be cross-checked against the EBE method to ensure the consistency of the estimate.
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The criteria used to determine a business’s value
Simply applying mathematical formulas is not enough. Two businesses with the same turnover may have radically different values depending on qualitative factors.
Location, premises and catchment area
- Footfall and visibility: a prime location in a pedestrianised city centre or a bustling shopping centre increases the value. An isolated location reduces it.
- Condition of the premises: any major works required (upgrading to disabled access standards, insulation, electrical work) will lower the estimated price.
- Catchment area: the economic vitality of the area, the arrival of new competitors or a promising urban development project directly influence the value.
Commercial lease, existing customer base and team
- Lease terms: a rent that is below market rates and a recently renewed lease provide security for the buyer and enhance the value of the business. For more information on this topic, see our comprehensive guide to buying a business.
- Customer profile: a loyal, diverse and regular customer base is worth more than a volatile customer base or one dependent on a single account. The layout of your sales area also plays a key role: a good understanding of the concepts of ‘hot zones’ and ‘cold zones’ in-store will help you maximise your turnover and, consequently, the value of your business.
- HR structure: the presence of an autonomous, skilled and stable team is a strong indicator of sustainability for any buyer.
Steps in the valuation process and choosing a professional (chartered accountant, solicitor, certified valuer)
Valuing a business is a specialist task that requires objectivity and rigour. It is strongly recommended that you engage recognised professionals:
- The chartered accountant: best placed to audit balance sheets, analyse profitability (EBITDA) and carry out the necessary financial adjustments.
- The solicitor or commercial lawyer: as specialists in commercial law, they accurately assess the legal risks associated with leases, contracts and licences.
- The certified business valuation expert: typically involved in cases of dispute, inheritance or complex arbitration.
In all cases, cross-referencing at least two valuation methods is good professional practice prior to any negotiations. Please also note that the quality of your shop’s layout has a direct impact on its profitability and, consequently, its estimated value: knowing how to lay out a shop effectively is a factor that is often underestimated when valuing a business.
Taxation of the sale and the difference between the estimated value and the sale price
It is essential to distinguish between the estimated value (the objective theoretical value of the business) and the final sale price, which is the result of negotiations between the buyer and the seller. Market conditions — such as the urgency to sell or the scarcity of the location — influence this difference.
The seller must also factor in the tax liability on the capital gain from the sale to determine their actual net profit. Capital gains from business activities are generally subject to tax, but several exemption schemes exist in France depending on the amount of revenue or in the event of the business owner’s retirement. Consulting a chartered accountant is essential to ensure this aspect is handled correctly.
Administrative reminder: when taking over or changing the business activity of a physical retail outlet, buyers must in some cases submit a business opening declaration to the relevant local authority departments, particularly for planning permission applications, changes to signage or the operation of a terrace on public land. Check with your local council before opening.
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