How a business is valued

The value of a business is not a single figure. It depends on the purpose (a sale, a new partner, an inheritance, a shareholder withdrawal, financing), on the data available and on the method chosen. The Italian Valuation Principles, issued by the Italian Valuation Body, ask you to choose a main method and compare it with at least one other as a cross-check. This tool does exactly that: it works out several methods from the same data and shows how far apart they are.

The five methods

Net asset. It starts from book net equity and brings it to current values, adding hidden gains, for example on property and brands, net of notional tax, or deducting hidden losses. It describes well companies that are worth mainly what they own, such as property companies and holdings. It says little about a business worth what it earns.

Income. It divides normal profit by a capitalisation rate, built from the government bond yield, a market risk premium, the beta coefficient and a premium for size and specific risk. It works when profits are steady and can be taken as normal. With very volatile or fast-growing profits it is unreliable.

Mixed with goodwill. It values net equity at current values and adds goodwill, that is the value of the profit above the normal return on net equity, for a limited number of years. It is the method most used for small and medium businesses, because it gives no perpetual value to excess profits.

Discounted cash flow. It discounts the cash flows of the coming years and a terminal value, and deducts net financial debt. It suits growing businesses or those with large investments best, but it depends heavily on forecasts. The terminal value often weighs more than half of the result.

Multiples. It applies a multiple from comparable deals to EBITDA, deducts net financial debt and applies an illiquidity discount for unlisted holdings. It is quick, but it is only as good as the comparison sample: that is why the tool proposes the sector average multiple (listed companies in Western Europe, Damodaran data), which you can replace with the one that fits your case.

How to read the range

The tool follows the approach of the Italian Valuation Principles 2026 (OIV), applicable from 2027 and available to read on the OIV Foundation website: three approaches (market, income, cost) and methods that apply them, chosen to fit the purpose and the characteristics of the business. If you use several methods, the result is a range with a reasoned main method, not an automatic average.

If the methods give close values, the estimate is solid. If they are far apart, one assumption usually weighs heavily: the rate, growth, the weight of goodwill or the multiple. Try changing it in the third step and see which method moves most. The main method is neither “the highest” nor “the average”: it is the one most consistent with the purpose and the nature of the business.

Where the data comes from

The starting beta and multiple by sector come from the Western Europe public datasets of Aswath Damodaran (NYU Stern), updated in January 2026 and based on listed companies: for a small unlisted business they are a starting point to adapt, which is why they remain editable. It is the free source in common use among valuers, listed as such in the document on the sources of financial and market parameters of the Padua Order of Chartered Accountants.

The reference rules of the PIV 2026 are these: net asset method with deferred tax on adjustments, non-operating assets valued separately, normalised profit and mixed methods with a limited period for excess profit, cash flows with a terminal value to be checked against the market, multiples of comparable companies, discount rate with CAPM and a “normal” capital structure.

The risk-free rate is the monthly average yield of the 10-year BTP published by the Bank of Italy in its Financial Markets series, updated every month. The rate used for hidden gains is the current Italian corporate income tax (IRES) rate. Beta, market risk premium, specific premium, goodwill period and illiquidity discount are reference values declared as assumptions: you see them under each field and can change them.

Frequently asked questions

Does this estimate count as an appraisal?

No. It is an indicative estimate from the figures you enter. For sales, contributions, shareholder withdrawals, inheritances and disputes you need a professional valuation, with supporting documents and a report.

Is the value gross or net of tax?

Profits and cash flows are after tax. Equity value is the value of the shares or quotas, after net financial debt and before the seller’s taxes, including those on the transfer.

What should I enter if I do not know net financial debt?

You can leave it empty: it is taken as zero and the result says so. If the company has debts to banks or lenders, the real value will be lower.

How many years are needed for normal profit?

The latest one is enough, but with two or three years the estimate is steadier: the tool uses the average of the profits you enter.

Sources. Italian Valuation Body, Italian Valuation Principles; Bank of Italy, Financial Markets, Table “Benchmark government bonds: gross yields to maturity”; Italian Income Tax Code (TUIR), art. 77 (IRES rate).