The formula buyers actually use
Strip away the jargon and, in our experience, almost every offer for a profitable Singapore SME is built the same way:
| Step | What it means |
|---|---|
| Normalised EBITDA | Your earnings before interest, tax, depreciation and amortisation, cleaned of one-offs and owner costs that will not continue under a new owner |
| × Multiple | How many years of those earnings the buyer will pay for, anchored to what comparable businesses have sold or traded for |
| = Enterprise value | The price for the business itself, debt-free and cash-free |
| Less net debt, plus or minus adjustments | Borrowings out, surplus cash in, plus any working capital adjustment agreed in the deal |
| = Equity value | What the shareholders actually receive |
Two levers decide the outcome: the EBITDA you can defend, and the multiple you can justify. Founders tend to obsess over the first. In our view, the second is usually worth more.
Lever one: an EBITDA figure that survives diligence
Your reported profit is the starting point, not the answer. Before any multiple is applied, a buyer (and a good adviser) will rebuild your earnings line by line:
- Owner add-backs. A founder salary above market rate, personal expenses run through the company, or a family member on payroll who will leave with you can be added back. They only hold if the cost genuinely disappears after the sale, and a buyer’s quality-of-earnings review will test every one.
- One-offs. A lawsuit, a relocation, a COVID-era grant. Remove what will not recur, in both directions.
- The true earning entity. If your business runs across several companies, earnings only make sense once the entities are combined and intercompany charges are stripped out.
A clean bridge from reported to normalised EBITDA is the highest-value preparation work in any sale. A squishy number invites the buyer to squash the multiple.
Lever two: the multiple
Here is the part most valuation calculators miss. Two businesses with identical profit can sell for very different prices.
| Same S$1M profit | Multiple | Value |
|---|---|---|
| No customer contracts, founder-dependent | 3x | S$3M |
| Contracted revenue, documented SOPs, a strong number two | 5x | S$5M |
Illustrative example adapted from Gwee Yi Chen’s LinkedIn post of 26 March 2026. Your multiple depends on your sector, size and buyer pool.
That is a S$2M swing from the same business. In our experience, what moves it:
- Provable revenue. Are your top customers under contract? Would they stay if you stepped back for six months?
- Founder dependence. If the relationships, the pricing knowledge and the key decisions all live in your head, a buyer is pricing the risk that they walk out the door with you.
- Management depth. A capable second-in-command is one of the cheapest multiple upgrades available.
- Customer concentration. One customer at 40% of revenue is a risk a buyer will discount.
- Recurring revenue. Contracted, repeat income is valued above project work you have to win again every year.
A buyer doesn’t pay for what you earned. They pay for what they can confirm will continue after you leave.
Gwee Yi Chen, Growth Alliance Capital
Why a DCF usually flatters a small business
A discounted cash flow model values your business on its forecast future cash. For a founder-led SME, in our experience, it tends to overstate value: the result is highly sensitive to the growth and discount-rate assumptions, and most small businesses do not have a long-range plan a buyer will underwrite.
That is why, at Growth Alliance Capital, we anchor the asking range on comparable transactions and treat a DCF as the upside case a buyer has to be persuaded to pay for, not the base. When the two methods disagree sharply, that gap is the negotiation, and it is far better to surface it before a buyer does.
Property and cash are not the same as the business
If your company owns its premises or sits on surplus cash, value them separately. In our view, net asset value is a floor and a negotiating anchor, not the price of the operating business. Mixing the two hides what the operations are really worth and often confuses buyers who only want one of them.
The headline price is not the cheque
A headline offer can look generous and still deliver much less on completion day. One common reason is the earn-out: part of the price paid later, only if the business hits targets under the new owner.
The day-1 cheque is the number. Everything else is a negotiation you haven’t started.
Gwee Yi Chen, Growth Alliance Capital
Compare offers on cash at completion, then on how much of the deferred amount is genuinely within your control.
When to start
The founders who achieve the best outcomes rarely start preparing when they decide to sell. They start two to three years earlier, while there is still time to put contracts in place, document how the business runs, build the team underneath them and clean up the numbers. In our experience, the work that moves a multiple typically takes 18 to 24 months.
If you are a Singapore or Southeast Asian founder considering an exit in the next three years, the most valuable thing you can get now is an honest read on where your business sits today.