It starts with adjusted profit
Most private company valuations begin with EBITDA — profit before interest, tax, depreciation and amortisation — then adjust for anything that will not carry on: an above-market owner's salary, personal costs run through the business, one-off legal fees, a family member on the payroll who does not work there.
That adjusted figure, not turnover, is what gets multiplied.
Then a multiple, set by risk
The multiple reflects how confident a buyer is that the profit repeats. Recurring contracts, spread of customers, a functioning management team and a growing market push it up. Owner dependence, one dominant customer and volatile margins pull it down.
Two businesses with identical profit can be worth very different sums for exactly this reason.
And finally, the detail
Cash, debt and working capital are settled on top. A business handed over with its normal level of stock and debtors, and no surprise liabilities, protects the price you agreed.
Compare offers on certainty and terms, not just the headline total.