Understanding how much a functioning business is worth isn’t just a numbers game. It’s a key decision that can make the difference between a smart investment and a costly mistake. If you’re thinking about buying, selling, or simply understanding the true value of your company, this guide will be just what you need.

Today, we’ll walk you through how to calculate the value of an ongoing business step by step, in a practical and accessible way, no need to be a financial expert. What matters is that you finish this reading with a clear, realistic idea of the process and, above all, the tools to make informed decisions.

What is an ongoing business and why is it important to value it?

An ongoing business, also known as an “operating company,” is one that’s already up and running: it has customers, generates income, pays employees, and meets its obligations. We’re not talking about a business idea or a plan, we mean something that already exists and breathes on its own.

So why is it important to know its value? Because knowing how much an active business is worth can help you:

• Negotiate a realistic sale or acquisition.

• Seek financing with solid arguments.

• Plan succession or onboard new partners.

• Understand the business’s true financial health.

Often, a business’s value is over- or underestimated because it’s confused with what we *think* it’s worth, rather than what the market is willing to pay.

Factors that influence the valuation of an operating business

There are several elements that directly affect how much a business is worth. It’s not just about money coming in and going out — it’s a mix of financial, strategic, and even emotional aspects. Let’s break down the key ones.

Current financial situation

This is the starting point. You’ll analyze:

• Current income and expenses.

• Profit margins.

• Debt levels.

• Liquidity.

• Operating profitability.

Everything in the balance sheets and income statements goes here. If the numbers don’t add up or there’s a lack of transparency, the valuation loses reliability.

Growth potential and market stability

Now we’re talking about the future: does the business have room to grow? Is it in a stable or highly volatile sector? A family restaurant in a well-established tourist area may have more real-world value than a promising startup with no steady income.

Reputation and intangible assets

Brand, client portfolio, active contracts, online presence, good reviews, company culture... All of this doesn’t show up in the numbers, but it matters — a lot. Sometimes, it’s what makes all the difference.

Most commonly used methods to calculate a business’s value

There are various methods to carry out a valuation, and not all work for every type of company. Here are the most common ones.

Discounted Cash Flow (DCF)

This method estimates expected future earnings and brings them to present value using a discount rate. It’s complex but very useful when the business has stable, predictable income.

It’s widely used for medium and large companies or those seeking investors.

Adjusted book value

This method calculates the real value of assets (what the company owns) minus debts. It’s simpler and useful in businesses with tangible assets: workshops, shops, real estate companies…

Market comparables

This method looks at how much similar businesses have sold for in the same sector or location. It’s practical, though it relies heavily on available data and transparency in the market.

Step-by-step guide to valuing an ongoing business

Now let’s get to the process. You don’t need to be an economist to follow it, but you do need the data on hand and a bit of common sense.

Review of financial documentation

Gather as much as you can: balance sheets, income statements, ledgers, tax returns, inventory… The more complete, the better.

Estimate of future profits

Project profits for the next 3 to 5 years. You can create conservative, moderate, and optimistic scenarios, then take an average. This isn’t guesswork — it’s about justifying your numbers properly.

Apply the most suitable valuation method

Once you have the data, apply the method that best fits your case. If you’re unsure where to start, try more than one and compare results. Just don’t rely on a single number: context always matters.

Common mistakes when calculating a business’s value

Here are some classic errors we see time and again:

• Relying only on intuition.

• Ignoring debts.

• Overestimating future projections without solid backing.

• Overlooking hidden costs.

• Failing to consider seasonal business cycles.

And perhaps the most important one: not seeking advice when it’s needed.

Expert tips for getting an accurate valuation

1. Be realistic: don’t fall in love with the business.

2. Use multiple valuation methods and compare results.

3. Consult with a third-party professional if the amount is significant.

4. Consider the local market context.

5. Always look beyond the numbers: value is also strategic.

When is it advisable to hire a professional appraiser?

It’s not always necessary, but in the following cases, we strongly recommend it:

• When there’s a sale or acquisition in progress.

• If there are disagreements between partners or heirs.

• In separation or liquidation processes.

• If you’re presenting the value to banks or investors.

A professional appraiser doesn’t just give you a number — they offer legal security, solid arguments, and peace of mind.

Conclusion: the importance of an objective and realistic valuation

Valuing an ongoing business isn’t an exact science, but it’s also not a guessing game. It’s a process that requires data, context, good judgment, and above all, honesty with yourself.

If you’re at that stage in your entrepreneurial journey where you need to know how much your business is worth, or the one you’re about to buy, do it right, with no shortcuts.

And if you need help, advice, or simply some inspiration for your next business move in Spain, we recommend checking out Business in Spain, where you’ll find resources, opportunities, and an experienced team to guide you every step of the way.

Because knowing what a business is worth... is just the beginning.