What is my business worth?

This is the question thousands of Swiss SME owners ask every year. Whether you are actively considering a sale, planning your succession, or simply want to know what your life's work is worth — a solid business valuation is the first step.

The good news: there are proven methods. The less good news: the "right" value depends on perspective, method, and buyer type. In this article we explain the three most important valuation approaches used by Swiss M&A advisers.

The Three Main Valuation Methods

1. DCF Method (Discounted Cash Flow)

The DCF method is considered the most conceptually sound: it calculates the present value of all future free cash flows of the business.

How does it work?

  1. Future cash flows are projected based on the last 2–5 years of results.
  2. These are discounted back to today using a risk-adjusted interest rate (WACC).
  3. A terminal value is added, estimating the value "in perpetuity" beyond the forecast horizon.

Example: A mechanical engineering SME with CHF 500,000 in normalised EBIT and a 5% WACC yields a DCF value of approximately CHF 4–6 million.

Strength: Reflects individual growth potential.
Weakness: Very sensitive to assumptions — small changes in WACC can shift the value by 20–30%.

2. EBIT Multiples (Industry Benchmarking)

The most widely used method in practice for Swiss SMEs. The enterprise value (EV) is calculated as a multiple of normalised EBIT:

EV = EBIT × Industry Multiple

Typical Swiss SME multiples (2025):

Industry EBIT Multiple (Range)
IT / Software 8–15×
Consulting / Services 4–8×
Manufacturing / Industry 5–8×
Trade / Distribution 4–6×
Construction / Trades 3–5×
Hospitality 3–5×

Important: EBIT must be normalised. This means: adjusting the owner's salary to market rates, stripping out one-off items, and removing private expenses run through the business.

3. Owner Cash Flow Method

Particularly relevant for smaller SMEs (fewer than 10 employees, owner-operated). Here the actual cash distributed to the owner is used as the basis — not the accounting EBIT.

This method is more realistic for buyers who will run the business themselves (so-called "owner-operators") and less relevant for strategic buyers or private equity.

What Drives Value — and What Holds It Back

Value Drivers (+)

  • Recurring revenues: Long-term contracts, subscriptions, service-level agreements
  • Low customer concentration: No single customer exceeding 20% of revenue
  • Scalability: Revenue growth without proportionate cost increases
  • Strong brand or IP: Local recognition, patents, proprietary processes
  • Independence from the owner: Can the business run without you?

Value Detractors (−)

  • Owner dependency: When you leave, so do the clients
  • Concentration: One key customer accounts for 50% of revenue
  • Declining margins: EBIT trend falling over the past 3 years
  • Legal risks: Pending disputes, unclear contracts
  • Outdated technology or infrastructure

Normalised EBIT — the Core of Every Valuation

Many SME owners pay themselves too little or too much. In a valuation, EBIT must be normalised to a "market-rate owner salary."

Rule of thumb for Switzerland (2025):

Revenue Market-Rate CEO Salary
Up to CHF 1M CHF 120,000–150,000
CHF 1–3M CHF 150,000–180,000
CHF 3–10M CHF 180,000–260,000
Over CHF 10M CHF 260,000–350,000

If you pay yourself more than market rate, EBIT is normalised downward. If you pay yourself less (common in owner-operated businesses), it is adjusted upward — the buyer will need to fund a replacement CEO.

Which Method Is Right for Your Business?

There is no single "correct" method. Professional M&A advisers always use multiple approaches to establish a range:

  • DCF for a forward-looking assessment
  • EBIT multiples for market comparison and plausibility check
  • Owner cash flow for small businesses and owner-operators

The range across the three methods gives you a realistic spread — and shows which values can be achieved under conservative, base, and optimistic scenarios.

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