Business valuation is the process of determining the economic value of a business. Common methods include EBITDA multiples, discounted cash flow and asset-based approaches.
Business valuation is important for selling a business, attracting investors, partnership buy-ins or buy-outs, insurance purposes and estate planning. The most common valuation methods are: EBITDA multiples (multiplying normalised EBITDA by an industry-standard multiple, typically 3-8x for SMBs), Discounted Cash Flow (projecting future cash flows and discounting them to present value), Asset-Based (summing the fair value of all assets minus liabilities) and Revenue multiples (multiplying annual revenue by an industry factor). The right method depends on the type of business, the purpose of the valuation and available data. For most SMBs, EBITDA multiples are the most practical approach. Clean, accurate financial records are essential for any valuation - buyers and investors will scrutinise your books closely. SortBooks helps maximise your valuation by maintaining clean, audit-ready financial records in Xero that demonstrate the true profitability and health of your business.
SortBooks helps with the bookkeeping behind business valuation by connecting to your Xero account and using AI to suggest the right account for transactions sitting in catch-all accounts, learning from your own past coding. Instead of fixing business valuation by hand, you review each suggestion, approve it, and SortBooks updates Xero, GST code included. Then ask the AI CFO about your numbers, using live Xero data.
EBITDA stands for Earnings Before Interest, Taxes, Depreciation and Amortisation. It measures operating profitability by excluding non-operating expenses and non-cash charges.
Goodwill is an intangible asset representing the excess amount paid for a business over the fair value of its identifiable net assets. It reflects the value of brand, reputation and customer relationships.
Net profit (also called net income or the bottom line) is your total revenue minus all expenses, including COGS, operating expenses, interest and tax. It is the final profit figure.
Cash flow is the movement of money in and out of your business. Positive cash flow means more money coming in than going out. It is often considered more important than profit for business survival.
Financial statements are formal reports that summarise your business's financial position and performance. The three core statements are the profit and loss, balance sheet and cash flow statement.
Connect Xero, check the AI's suggestions and approve the changes. SortBooks updates Xero for you.