Language
Buying or selling a company is one of the most strategic and impactful decisions a business can make. And at the heart of every successful transaction is a proper business valuation.
In this article, we’ll walk through the key factors and valuation methods used to determine a company’s true economic value — whether you’re preparing to sell your business or looking to invest in one.
A business valuation is the process of determining the economic worth of a company. It takes into account assets, liabilities, cash flow, and growth potential to arrive at a fair market value.
A solid valuation helps both parties — the buyer and the seller — negotiate a deal that reflects the company’s real value. But not all companies are valued the same way: industry, market dynamics, and business model all play a role in how the valuation is approached.
Historical financial performance is one of the first things buyers look at. Steady income and profit trends reflect a company’s ability to generate future returns.
Projected cash flow is a major factor, especially for growth-stage businesses. Buyers want to know what the company can earn — not just what it has earned.
These include physical assets like property or equipment, but also valuable intangibles like brand recognition, trademarks, and intellectual property.
Existing debt and other liabilities reduce the net value of a business and must be considered to get an accurate picture.
A company with a strong foothold in a growing industry will often command a higher valuation, especially if it has a unique offering or defensible market share.
A skilled leadership team and a positive internal culture are major assets — especially in industries where talent retention and execution are key to scaling.
The best valuation method depends on your industry, business model, and the purpose of the transaction. Here are three widely used approaches:
This method calculates the value of a company based on its accounting records: assets minus liabilities. While straightforward, it may underestimate value in businesses with strong brand equity or intangible assets.
DCF estimates the value of a business based on its future cash flows, discounted to present value. It’s one of the most comprehensive and widely used methods — ideal for companies with growth potential.
This approach compares the company to similar businesses that have recently been sold. It uses metrics like price-to-earnings (P/E) or enterprise value/EBITDA to gauge fair market value.
Tech startup success:
A fast-growing Mexican tech company chose to sell a large equity stake to a private investment fund. By using the DCF method, they demonstrated strong long-term value, resulting in a highly favorable valuation and strategic growth funding.
Missed opportunity in manufacturing:
A manufacturing business was valued only based on physical assets, ignoring client relationships and brand reputation. The seller accepted a lowball offer, unaware that the true value of their business included significant intangibles.
An accurate valuation ensures that both buyers and sellers walk away with a fair deal. It also builds trust, prevents future disputes, and creates a strong foundation for post-transaction success.
At Singular Law, we guide companies through every step of the acquisition process — including legal and financial aspects of business valuation — to help you make confident, strategic decisions.
📩 Thinking about buying or selling a business in Mexico?
Let us help you get the valuation right. Contact us today to get started.
We're ready to help. Our team has a 24-hour response time.
