One of the most common questions business owners ask before exploring a sale is: what is my business actually worth? The answer depends on several factors — your industry, your earnings history, your asset base, and the current state of the M&A market. This guide explains the primary valuation methods used in Canada and how CMBB, under the leadership of Leonardo Obodoeke, approaches the valuation of small and medium-sized businesses.
The EBITDA Multiple Method
The most widely used valuation method for Canadian SMEs is the EBITDA multiple. EBITDA — Earnings Before Interest, Taxes, Depreciation, and Amortisation — represents the operating earnings of a business before non-cash and financing charges. It is a proxy for the cash-generating ability of the business. A buyer will apply a multiple to this figure based on the perceived risk and growth potential of the business. The applicable multiple varies by sector, revenue quality, customer concentration, and growth trajectory — with recurring-revenue businesses generally commanding higher multiples than cyclical or owner-dependent ones.
The Asset-Based Valuation Method
For businesses with significant tangible assets — real estate, machinery, equipment, and inventory — an asset-based valuation may be more appropriate than or complementary to an earnings-based approach. This method calculates the net asset value of the business: total assets minus total liabilities. For manufacturing businesses, this often includes a detailed equipment appraisal and a review of inventory at current market value. CMBB uses both methods and presents the higher of the two as the basis for its offer.
Factors That Increase Your Business Valuation
Several factors can meaningfully increase the multiple a buyer is willing to pay. Recurring revenue or long-term customer contracts reduce risk and command a premium. A diversified customer base — where no single customer dominates revenue — is viewed favourably. Strong management teams that will remain post-acquisition reduce key-person risk. Clean, audited financials with consistent growth trends signal a well-run operation. CMBB's advisory team, which includes Darie Urbanky — former President and COO of CI Financial Corp. — brings institutional-grade analysis to every valuation.
How CMBB Calculates Its Offers
CMBB's valuation process begins with a review of three to five years of financial statements, a site visit, and conversations with the owner about the business's history, operations, and growth opportunities. We apply both an EBITDA multiple and an asset-based analysis, and we present a written offer with full methodology disclosed. We do not lowball. We do not use the due diligence process to renegotiate the price. The offer we present is the offer we intend to honour.
Curious what your business might be worth? CMBB offers confidential, no-obligation valuations for Canadian business owners.
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