Diffactory

Here’s the part most founders miss.

Finding out your business is worth less than you expected isn’t the worst outcome.

Finding out at the finish line is.

Knowing your number early gives you time to improve the business, increase the multiple, and create more options.

That’s a much better place to be.

Tip: What’s one thing your business still depends on you for? Start there.

Yesterday, we asked if you knew what your business was worth.

Today, let’s talk about how people actually calculate it.

At a high level, it comes down to one simple equation:

Earnings × Multiple = Business Value.

Your earnings tell buyers what the business produces. Your multiple reflects how far into the future a buyer believes those earnings will continue.

One more thing.

Don’t compare your business to your buddy’s exit and don’t pull random multiples off the internet.

Different industries, different buyers, and different markets.

The goal is to understand why it’s your number.

Tip:
- If someone asked you how your business is valued, could you explain it in one sentence?

If not, start with this:

Earnings × Multiple = Value.

Measure It: By the end of this week, can you explain what affects your earnings and what affects your multiple?

You probably know what your business made last month, but do you know what it’s worth today?

Most founders don’t, and that’s okay.

Nobody teaches us to think this way when we start a business.

This week, we’re changing that. Stay tuned!

Tip: Write down your best guess of what your business is worth today. Don’t worry about getting it right. Start by knowing where you stand.