For founders, CEOs, and CFOs in consumer, beauty, or healthcare with EUR 1–50M revenue
Most founders of companies in the EUR 5–30M revenue range have a number in their head — what they think their company is worth. That number came from something: what they heard a competitor sold for, a remark from their accountant, or the rough "5x EBITDA" rule of thumb they read once. The problem is that number is almost always wrong. In my experience, the gap between what an unadvised founder thinks their company is worth and what a serious buyer will actually pay can be significant — sometimes 30% or more. That gap is not a negotiation — it is the distance between an assumption and a valuation. I once saw a founder who had a number in mind — a number based on what he felt the company was worth — and asked his bankers to build the valuation analysis around it. The analysis could not support it. The company went to market anyway, and the bankers managed to negotiate a serious offer that was actually above fair market value. The founder rejected it — it was still below his number. Two years later, he sold to the same buyer, for 10% less than the original offer he had turned down. Two years of process, advisory fees, management distraction, and a worse outcome than what was on the table from the start. This article explains how valuations actually work for companies your size, why the multiple matters far less than you think, and what you need to know before someone makes you an offer.
Founders fixate on multiples. "What multiple will I get? What is the market paying?" But the multiple is only half the equation — and often not the important half. A multiple is applied to something. The multiple applied to revenue is different from the multiple applied to EBITDA, and the multiple applied to EBITDA is applied to a specific definition of EBITDA that your buyer and you may disagree on entirely. A company with EUR 2M of EBITDA at 8x is theoretically worth EUR 16M. But if EUR 400K of that EBITDA comes from cost add-backs that the buyer will not accept — deferred capex, one-time revenue, management related-party transactions — then the true EBITDA the buyer will value is EUR 1.6M, and the valuation becomes EUR 12.8M. That EUR 3.2M gap is not a renegotiation point. It is the mechanical result of the base not holding up.
The base matters more than the multiple. A buyer will apply roughly similar multiples across a range of comparable companies, but the restated EBITDA varies wildly depending on the quality of the accounting underneath it. The EUR 2M company with clean, audited financials and explicit add-back documentation and the EUR 2M company with adjusted figures and grey-area cost classifications will not trade at the same multiple — the second one will trade at a substantial discount, or not trade at all. The difference is not the business. The difference is the base.
Multiples in consumer, beauty, and healthcare move on a small number of factors. Recurring revenue commands a significantly higher multiple than one-time transactional revenue — often several turns higher on EBITDA. A beauty brand with a large share of revenue from direct-to-consumer subscription services and strong retention will trade at a materially higher multiple than a distributor that sells once to each retailer and has no contractual guarantee of repurchase. The difference is not the quality of management or the brand. It is the visibility of future cash flow. Recurring revenue is predictable. One-time revenue is not.
Customer concentration also moves the needle sharply. A company where a single customer accounts for a large share of revenue trades at a material discount to an otherwise identical company with diversified revenue. A healthcare platform with many institutional clients each contributing a small share of revenue will command a higher multiple than a contract research company dependent on a handful of pharmaceutical sponsors. If your top customers represent a disproportionate share of revenue, a buyer will apply what is called a concentration discount. The way it works in practice is the valuation multiple will be lowered or the earnout will be extended. Either way, you lose value.
Margin profile and growth trajectory are equally material. A company with strong EBITDA margins will trade at a higher multiple than a comparable company with thinner margins, all else equal. A company with consistent revenue growth over the last three years will trade higher than a flat one. But growth and margins move in the opposite direction from most founders' expectations — slow, stable margin expansion is more valuable than volatile, lumpy growth. A company with moderate margins, steady single-digit growth, and demonstrated margin stability will trade higher than a company with lower margins, flashy double-digit growth, and no evidence that margins will hold if growth slows.
In beauty specifically, brand strength matters. A direct-to-consumer beauty brand with strong gross margins, recognisable positioning, and social media engagement metrics showing strong customer loyalty will trade meaningfully higher than a white-label or contract manufacturer with the same margin. But brand is valued based on evidence — retention data, repeat purchase rates, customer acquisition cost relative to lifetime value — not narrative.
Investment banks have more than three valuation methods in their toolkit — DCF, comparable companies, precedent transactions, LBO analysis, sum-of-the-parts, asset-based approaches, and others. For a private mid-market company in the EUR 1–50M range, three are most consistently applied: DCF, comparable companies analysis (where relevant), and precedent transactions. A fourth — LBO analysis — becomes directly relevant when private equity buyers are involved, which is common at this size. Each method tells a different story.
A DCF values your company based on the present value of its projected future cash flows. You build a forecast — usually five years out — and then estimate a terminal value that represents the business beyond the forecast period, discounted back at a weighted cost of capital that reflects your capital structure, the cost of your debt, and the return equity investors require given the risk profile of your business and sector. The output is a single valuation. One important caveat: for most mid-market companies, the terminal value accounts for 60–80% of the total DCF output, which means the valuation is heavily driven by long-term assumptions rather than near-term projections. The broader problem with a DCF is that it depends entirely on the assumptions in your forecast. If your management projects aggressive growth and a buyer's advisors think a more moderate trajectory is realistic given the market and your historical trends, the difference in valuation can be enormous. A DCF is only as good as the plan underneath it. For most mid-market companies, the DCF is the starting point for a negotiation, not the conclusion.
Comparable companies analysis works like this: you find publicly traded companies that operate in the same activity field and geography as yours — those are the primary selection criteria — and then filter further by scale and business structure. You extract their current trading multiples and apply adjustments for size, liquidity, and risk. The discount applied reflects the fact that private mid-market companies are less liquid, less diversified, and harder to exit than their public peers. The total discount relative to public company multiples can be significant, but it is not a simple formula — it is embedded in the multiple selection and the deal dynamics. You then apply the resulting multiple to your EBITDA or revenue. The output is a range of valuations. The advantage of comps is that they reflect the market price at a given moment. The disadvantage is that comps are only as good as the comparability. A beauty brand with strong DTC revenue and subscription models is not comparable to a distributor with one-time sales, even if both are "beauty companies." The buyer will make this distinction before you do.
Precedent transactions are deals that have actually closed in your sector and peer group. They provide the most direct evidence of what buyers will actually pay. A precedent transaction for a similar-sized healthcare company that closed 18 months ago is more informative than a valuation theory. The limitation is that each deal reflects unique circumstances — that company may have had different growth, concentration, or margin characteristics. And markets move. Precedent transactions from 24 months ago in consumer goods, for example, may reflect a multiple environment that has already compressed.
Professional advisors triangulate all three. They run a DCF, they source comps, and they find precedents. If all three cluster around EUR 15–18M, that is a strong signal. When they diverge, the interpretation matters: precedent transactions typically come in above trading comps because they embed a control premium — the price a buyer pays to acquire outright control of a business, which is structurally higher than a minority market trading multiple. The DCF, meanwhile, represents the intrinsic value of the business based on its projected cash flows — buyers do not pay at DCF by default, because a financial buyer needs to generate a return above their cost of capital, which means they will bid below it. A strategic buyer might exceed it if synergies are large enough to justify the premium. What this means in practice: if your three methods cluster around similar values, you have a defensible number. If they diverge significantly, it usually points to a problem in one of the inputs — an aggressive management forecast inflating the DCF, comps that are not truly comparable, or precedents from a different market cycle.
Your accountant probably gives you a statutory EBITDA figure — the number derived directly from your audited financials under IFRS or local GAAP. That is rarely what a buyer values. A buyer values adjusted EBITDA, which adds back costs that are either non-recurring or specific to you as the owner. The problem is that "adjusted EBITDA" has no legal definition. Every buyer and every seller has a different view of what belongs in the add-backs. The gap between what you call adjusted EBITDA and what the buyer will confirm during diligence can be substantial — and because the multiple amplifies the base, even a moderate EBITDA disagreement translates into a significant impact on enterprise value.
Common add-back disputes: You argue that EUR 150K spent on a one-time brand refresh should be added back because it will not recur. The buyer says it will recur every 3–4 years and adds back only EUR 50K annually. You have a family office managing your treasury and pay EUR 80K in annual fees. The buyer says that should be normalised to EUR 35K based on their internal cost, and adds back only EUR 45K. You employ a CEO — yourself — at EUR 300K annually. The add-back logic only works in your favour if you are paying yourself above market rate: if a replacement CEO would cost EUR 200K, you add back EUR 100K as excess owner compensation. But if a replacement CEO would cost EUR 500K, the buyer does not add anything back — instead they reduce your EBITDA by EUR 200K to reflect the real cost of running the business after you leave. Paying yourself below market rate works against you in a valuation.
Every add-back requires documentation. If you are adjusting for one-time costs, you need to show that they genuinely will not recur — not that you intend to avoid spending them, but that the business does not require them. If you are adjusting for management costs, you need benchmarks and comparables. Related-party transaction add-backs require forensic analysis — the buyer will scrutinise any transaction involving you, your family, or companies you control. If the supporting documentation is weak, the buyer will not add it back.
The best practice is to build your adjusted EBITDA bridge line-by-line with supporting schedules 12–18 months before you think you might sell. In a formal process, this bridge becomes a core element of your Confidential Information Memorandum — the document your sell-side advisor prepares to present the business to potential buyers. The CIM frames the equity story, anchors the valuation, and sets the terms of the conversation. A well-prepared CIM with a defensible EBITDA bridge means you control the narrative from the start. Reference to previous adjusted EBITDA article will give you the framework. Without that preparation, you are negotiating on the buyer's terms.
The worst time to discover what your company is worth is when someone makes you an offer. At that point you are reactive. The buyer has already done their analysis. Their number is anchored. If your number is 40% higher, the buyer concludes you have not done the work — and the conversation stalls. If your number is 40% lower, you have left value on the table that is now gone forever.
The best time to know what your company is worth is 12–18 months before you think you might want to sell, raise capital, or consider an acquisition. At that point you still have time. If your valuation is lower than you expected, you have time to fix the things that drag it down — margin profile, customer concentration, or growth consistency. If your valuation is higher than you expected, you have time to de-risk the business and make the number defensible. Either way, knowledge is leverage.
It is also worth noting that valuation is not a purely analytical exercise — it is shaped by process dynamics. A well-run sell-side process creates competitive tension among multiple bidders, which can move the final number meaningfully above what any single bilateral negotiation would produce. Conversely, a founder who enters a one-on-one conversation with a buyer who approached them directly has no competitive leverage at all — and that leverage can evaporate even in a structured process if confidentiality breaks down. In the deal I mentioned earlier, the situation was made worse by the fact that one of the founder's own executives leaked internally that only one serious offer had been received. Once the buyer knew there was no competition, whatever leverage the seller had left disappeared entirely. The way the process is structured — and how tightly information is controlled within it — matters as much as the underlying financials.
There are two layers of preparation, and most founders confuse them. The first is getting your numbers right: restating your financials to standards a buyer will accept, documenting every add-back, building a defensible EBITDA bridge. That is accounting work — your CFO, your auditor, or a Big Four advisory team can do it. The business plan article walks through the common errors that suppress valuations.
The second layer is positioning and process — and this is where most founders are unadvised. Who are the right buyers for your company? How do you create competitive tension between them? How do you frame the equity story in a way that anchors the valuation where you want it? How do you structure the process so that you control the timeline, the information flow, and the negotiation? These are not accounting questions. They are strategic decisions that determine whether you sell at fair value or leave millions on the table. This is the work an independent M&A advisor does — distinct from your accountant, and distinct from the buyer's advisors who are working against you.
This is not theoretical. I have sat in rooms where the sell-side number was EUR 12M and the buyer opened at EUR 7M because the business plan did not hold up. The company's fundamentals had not changed. The plan had been exposed. The EUR 5M gap was real, and it belonged to the seller because they had not done the work to defend it — and because no one on their side had positioned the business to withstand that scrutiny.
The number in your head is not your valuation. Your valuation is what a rigorous buyer will pay after stress-testing every assumption in your business plan against sector benchmarks and running up to three independent methods — DCF, comparable companies where relevant, and precedent transactions — to triangulate a defensible range. That is the work. Know it before they do.
Bonneau Advisory — M&A Strategy for Consumer, Beauty & Healthcare
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