Enterprise Value (EV)

The total value of a business including debt and excluding cash, the theoretical takeover price.

Enterprise Value is the most comprehensive measure of a company's total value. Unlike market capitalisation (for public companies), EV accounts for debt, preferred stock, and cash positions. For SMEs, EV is typically calculated as equity value plus net debt. EV multiples (EV/EBITDA, EV/Revenue) are the standard way to compare valuations across businesses.

EV vs equity value: why the distinction matters

Owner-operators almost always quote equity value when they talk about "what the business is worth", but acquirers and lenders think in EV. The bridge between the two is net debt: a $5M EV business with $1M of net debt is worth $4M in equity to the seller. Sale processes routinely fall apart at heads-of-agreement stage because the buyer offered EV and the seller heard equity value.

EV multiples in practice

EV/EBITDA is the dominant multiple for trading SMEs, typically 3-7x depending on industry, growth, and risk. EV/Revenue is used for early-stage or fast-growing businesses where EBITDA is not yet meaningful, typically 1-3x for services and 3-10x for SaaS. The right multiple depends heavily on industry and growth profile, which is why generic "rule of thumb" multiples are usually wrong.

What buyers actually adjust

EV calculations include all interest-bearing debt (bank loans, equipment finance, director loans), but acquirers typically also adjust for: surplus cash above operating need (added to seller proceeds), unfunded leases (added to debt), shortfall in working capital below normalised levels (deducted from price), and pending tax or legal liabilities. The "EV minus net debt" headline always hides a working-capital target negotiation underneath.

How Advisorli calculates EV

The Valuation Suite calculates EV from your live accounting data (equity value plus interest-bearing debt minus operating cash) with the EBITDA and revenue multiples applied transparently and the historical EV trend tracked across snapshots so you see how strategic decisions have moved the number.

Formula

Example

A business worth $2M equity with $500K debt and $100K cash has an EV of $2.4M.

Related Terms

Industries where Enterprise Value (EV) matters most

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