Business valuation: common mistakes that affect the value of your SME

Valuing a company is much more than crunching numbers — it is understanding its potential, its risks, and its market positioning. In the case of SMEs, business valuation becomes especially relevant in moments of strategic decision: entry of new partners, M&A processes, raising investment, restructuring, or even succession planning. However, there are common mistakes that can distort the real value of the business and compromise future decisions.

Why value your SME?

Business valuation allows you to:

• Know the current economic value of the business;
• Support purchase, sale, or merger decisions;
• Identify critical areas for improvement;
• Attract investors or financing based on solid data.

Frequent mistakes in SME valuations

1. Confusing value with price

A company's value is determined by objective factors (cash flows, assets, risks, future prospects). Price, however, depends on negotiation between parties. Confusing both can lead to misaligned expectations.

2. Ignoring adjustments to accounts

Many SMEs do not perform financial adjustments (e.g., partners' remuneration above market rates, extraordinary or non-recurring expenses), which distorts EBITDA and compromises the reliability of the valuation.

3. Not considering business risk

The value of an SME depends heavily on its operational, financial, and market risk. Businesses too dependent on a single client, supplier, or key employee tend to have lower value than they appear.

4. Basing valuation only on multiples

Market multiples (e.g., EBITDA x sector) are useful as a reference but do not replace a personalised analysis. Each company has unique characteristics that must be considered.

5. Undervaluing future potential

History is important, but value also incorporates future prospects. Businesses with robust growth plans, entry into new markets, or relevant innovation may justify valuation premiums.

6. Neglecting goodwill

Many SMEs have built a reputation, brand, or loyal customer base that is not reflected in accounting assets. Ignoring this intangible can significantly undervalue the company.

How to ensure a rigorous valuation

✔️ Collect and analyse financial data from the last 3 to 5 years

✔️ Perform relevant accounting adjustments

✔️ Apply appropriate methodologies (DCF, Multiples, Asset Value)

✔️ Assess the sector context and direct competitors

✔️ Consider strategic plans, team, and operational structure

✔️ Obter support from an external and independent team

The importance of a professional valuation

A poorly executed valuation can generate significant losses — both by selling below real value and by driving away investors with unrealistic expectations. At Yunit Consulting, we value companies based on internationally recognised methodologies, combining technical knowledge with the real context of Portuguese SMEs.

Are you considering selling, merging, or investing in your company? The right valuation is the starting point for making informed decisions and maximising the return on your business.

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Last update: 15 October 2025