I get asked some version of “what’s my company worth?” almost every week — sometimes from a founder about to raise a Series A, sometimes from a promoter’s son who’s just inherited a family manufacturing business and has no idea what to do with it, and occasionally from someone at a dinner party who genuinely just wants to know how these numbers get made. It’s a fair question, and after nearly two decades of sitting on the other side of that conversation, I’ve noticed most people are asking it with the wrong mental model in their head.
They think valuation is a lookup. Like there’s a formula, you plug in revenue, and a number pops out. If only it were that simple my job would be a lot less interesting, and honestly, a lot less useful.
So let me try to explain what business valuation actually is, how the business valuation process actually works:
Business valuation is an evidence-based opinion of what a company, share, or asset is worth, arrived at through one or more of three recognized methods income (DCF), market (comparables), and asset-based. In India, a formal valuation from an IBBI Registered Valuer is legally required for Companies Act share issuances, SEBI-regulated transactions, FEMA cross-border deals, NCLT schemes, and most Ind AS fair-value reporting and is a smart idea even when it isn’t mandated, ahead of a fundraise or M&A deal.
Valuation is an opinion, backed by evidence
Here’s the thing I wish more people understood going in: a valuation report is not a fact. It’s a professional, evidence-based opinion of what a business, a share, or an asset is worth, as of a specific date, for a specific purpose. Change the date, or change the purpose, and the number can legitimately change too not because anyone’s being dishonest, but because value genuinely depends on context.
A company being valued for an ESOP grant under Income Tax rules is a different exercise from the same company being valued for a strategic acquirer who wants to fold it into their existing distribution network. Same business, same balance sheet, potentially quite different numbers and both can be entirely correct.
This is where I see even smart, financially literate founders get tripped up. They’ll quote a valuation from their last funding round in a conversation about selling equity to an employee, not realizing those two numbers were never meant to answer the same question.
The three ways we get to a number (Business valuation methods)
There’s a fair bit of textbook language around valuation methodology, but in practice, almost every valuation I’ve signed boils down to some combination of three approaches.
Income approach: mostly Discounted Cash Flow. We project free cash flow across an explicit forecast period, usually five to ten years, and discount it back using a weighted average cost of capital — cost of equity via CAPM, blended with an after-tax cost of debt, weighted by target capital structure. The terminal value, built on a Gordon Growth assumption, typically ends up driving 60-70% of total enterprise value.
That’s worth sitting with: most of the number you’re relying on is really a bet on perpetuity growth and long-run margins, not next year’s numbers. I’ve turned back more than one model where the terminal growth rate quietly exceeded plausible long-run GDP growth, an easy trap when you extrapolate a hot forecast year forward.
Market approach: comparable companies and transactions. We build a peer set and apply the resulting multiples: EV/EBITDA, EV/Revenue, or P/E -to the subject company’s financials, after two adjustments people underrate. First, normalization: stripping out one-off items and non-market-rate related-party costs so you’re comparing like-for-like earnings power. Second, a discount for lack of marketability, since private shares aren’t as liquid as listed peers and I’ve applied anywhere from 10% to 25%, backed by option-pricing or restricted-stock studies rather than a round number.
Asset approach. We restate the balance sheet to fair value for land and buildings, plant and machinery at depreciated replacement value, investments marked to market , net of liabilities, including contingent ones an auditor’s note might bury. This fits asset-heavy businesses well and fits a services or technology business poorly, where value sits in intangibles that don’t show up on a balance sheet.
These three don’t get averaged mechanically. If all three land in different places, the job is to weight them or discard one based on which method’s assumptions actually hold for this business, this date, this purpose, and document that reasoning rather than just asserting it.
Most of my more contentious engagements are the ones where a valuation ends up scrutinized by an auditor, a tax officer, or an opposing party in a dispute to come down to which of these three methods was chosen, and whether that choice actually fit the business or was chosen because it gave someone the answer they wanted. This is, in my experience, the single biggest quality difference between valuers.
What the process actually looks like, start to finish
Four stages, in practice.
Purpose, first. Everything downstream – applicable regulation, standard of value, which method is defensible – depends on this. A Companies Act share issuance, SEBI ICDR compliance ahead of an IPO, and an internal restructuring are governed by different rules, and conflating them is a common, expensive mistake.
Information gathering. Financials, business plans, contracts, management input, industry data -whatever the engagement needs. This is usually where timelines slip, not the modeling.
The technical work. Build the model, run the method(s), and sanity-check the output from multiple angles. If two methods land far apart, that’s a signal to revisit assumptions, not a nuisance to average away.
The report. Structured, defensible, and written to survive scrutiny from an auditor, regulator, or tribunal -not just to hand over and forget.
When you actually need a formal valuation -and when you don’t
You need one, typically from an IBBI Registered Valuer, when the law requires it: Companies Act share issuances, SEBI-regulated transactions, FEMA-governed cross-border deals, NCLT schemes, most Ind AS fair-value reporting. Skip it here and you’re not just under-informed, you’re exposing the company’s officers to real regulatory risk.
You should get one, even when it isn’t mandated, before a fundraise, an M&A negotiation, or a co-founder buyout. I’ve watched founder disputes turn ugly simply because two people carried two different numbers in their heads and never got an independent opinion before the disagreement hardened.
You probably don’t need one for a directional sense of where your business stands, or peer benchmarking out of curiosity. A well-built calculator or a quick advisor conversation is enough – we built one for exactly this reason.
A case study: when the “obvious” method was the wrong one
Let me make this concrete with a composite example drawn from the kind of engagement we see often (details adjusted to protect confidentiality, but the technical problem is a real and recurring one).
A mid-sized specialty steel manufacturer came to us needing a valuation to support a strategic stake sale to a larger industry player. The company’s own finance team had already built a DCF -reasonable at first glance, projecting steady 12% revenue growth for eight years off the back of a new furnace capacity addition, with a terminal growth rate of 5%.
Two things concerned me on first read. First, the 12% growth assumption was extrapolated from a single strong year that had been driven by a temporary spike in steel prices industry-wide, not by anything company-specific and repeatable. Second, the business was genuinely asset-heavy -the furnace, the land, and the plant represented a substantial share of the balance sheet -and an income-only approach was, in effect, throwing away directly observable information about what those assets were actually worth.
Here’s what we did differently:
- We rebuilt the revenue forecast off a normalized, mid-cycle steel price assumption rather than the peak year, which brought the growth assumption down to a more defensible 7-8% for the explicit period, tapering to a terminal growth rate closer to 4%, in line with long-run industrial GDP growth.
- We ran a parallel asset approach, revaluing the furnace and plant at depreciated replacement cost with an independent technical valuer’s input on remaining useful life, since plant and machinery valuation sits outside a pure financial valuer’s registration and needs to be done by someone qualified for that specific asset class.
- We cross-checked both against a market approach using a peer set of five listed specialty steel producers, adjusting their EV/EBITDA multiples downward for the subject company’s smaller scale and lower promoter-holding liquidity (a DLOM of roughly 15%, supported by a restricted-stock study).
The three methods, done properly, landed within about 8% of each other, which itself was the useful signal. When methods that rely on genuinely independent logic converge, that’s real corroboration, not coincidence. We ultimately weighted the DCF and market approaches roughly equally, with the asset approach used as a sanity floor rather than the primary driver, and documented that weighting rationale explicitly in the report, anticipating that the acquirer’s own diligence team would ask exactly that question. They did, on the first review call, and the report held up without a single revision.
The finance team’s original DCF wasn’t dishonest but it was just built by people who deal with these numbers occasionally, using the assumption that was easiest to reach for. That’s the value an independent, registered valuer is actually adding: not access to a fancier model, but the judgment to know when the obvious method is quietly wrong.
Frequently Asked Questions
What is business valuation in simple terms? It’s a professional opinion of what a company, share, or asset is worth as of a specific date, for a specific purpose, arrived at through recognized methods rather than guesswork.
What are the main business valuation methods? The three core approaches are the income approach (typically Discounted Cash Flow), the market approach (comparable companies and transactions), and the asset approach (fair value of net assets). Most credible valuations use more than one to cross-check the result.
Who is allowed to do a business valuation in India? For statutory purposes under the Companies Act, SEBI regulations, or Ind AS, the valuation must be certified by an IBBI Registered Valuer holding current registration in the relevant asset class — verify this directly on IBBI’s public directory before engaging anyone.
How long does a business valuation take? A straightforward valuation for a funding round or ESOP grant can often be done in one to two weeks once information is provided; complex cross-border or multi-asset-class engagements take longer.
The honest bottom line
If there’s one thing I’d want a founder or a promoter to take from this, it’s that the quality of a valuation depends far more on the judgment behind it than on the sophistication of the spreadsheet. Anyone can build a DCF model. Knowing which assumptions to challenge, which method actually fits your business, and how to defend that opinion when someone pushes back on it – that’s the actual work, and it’s the reason this profession still needs registered, accountable professionals rather than a template.
If you’re weighing whether your situation calls for a formal business valuation, or you’d just like a second opinion on one you’ve already received, I’m happy to have that conversation directly if you can reach our team at Omnifin, browse our business valuation services, or try our valuation calculator first if you just want a directional starting point.
— Dr. Vikash Goel, CA, CFA, MBA (IIM Calcutta), PhD, Managing Partner, Omnifin