Business valuation used to be done only now and then, usually when a sale or dispute made it necessary. Today, valuation plays a much more active role in decision-making.

Higher interest rates, changing risk appetite, and fast data access mean that accurate valuations are crucial for a strategy's success or failure. It’s no longer just about arriving at a number. It’s about understanding what drives that number, how defensible it is, and how it should be used.

What’s Changed in Business Valuation?

Better data, faster insights, but more judgement required

Modern valuation relies on far more data than it did even a few years ago. Financial statements now combine with operational data like customer retention, sales pipelines, pricing behaviour, and working capital trends.

Advanced analytics, like AI tools, can test assumptions, show risk areas, and boost speed. Used well, these tools help identify what actually drives value. If used poorly, they can create a false sense of precision.

Technology has improved the inputs, but judgment still matters. Assumptions need to be reasonable, sector-specific, and consistent with how buyers think.

Market conditions now influence valuations at a faster pace.

Valuations don’t exist in isolation. Interest rates, inflation, and deal activity directly impact multiples and discount rates.

Recent cycles have shown how rapidly sentiment can shift.

• Higher financing costs have compressed multiples in some sectors

• Buyers are more focused on earnings quality than growth alone

• Capital-intensive or volatile businesses face greater scrutiny

The main point is simple: comparables should be current, relevant, and adjusted for market conditions. They shouldn’t come from old transactions.

Understanding the Main Valuation Approaches

Income approach: valuing future cash flow

The income approach values a business by looking at its expected future earnings. It often uses methods like discounted cash flow or capitalised earnings models.

This approach works best where:

• Revenue is predictable

• Margins are stable

• Forecasts are credible

Small changes in assumptions can materially change value. A small change in the discount rate or growth assumptions can significantly affect value. That's why having clean data and realistic forecasts is so important.

Market approach: valuing against comparables

The market approach looks at a business alongside similar companies. It uses multiples like EBITDA, earnings, or revenue for comparison.

It’s most effective when:

• There is active transaction data

• Comparable businesses truly share similar risk and scale

• Financials are normalised properly

Care is needed to adjust for owner involvement, one-off items, and differences in working capital or capital structure.

Asset approach: valuing what the business owns

The asset approach values a business based on the fair value of its assets less liabilities.

It’s most relevant for:

• Asset-intensive businesses

• Property-backed structures

• Situations where earnings are weak or volatile

On its own, this approach can understate value where goodwill, systems, or customer relationships drive returns.

Why Strategic Financial Leadership Matters

Valuation outcomes improve when strategy and financial discipline are aligned.

Businesses with clear plans and measurable value drivers usually have more credible valuations. Regular forecasting and reviews build further credibility. Buyers place a premium on clarity and control because it reduces execution risk.

Leadership quality also matters. Businesses that rely too much on one person or lack clear processes often see discounts, even if they're profitable.

How RJD Advisory Approaches Valuation

At RJD Advisory, valuation is never treated as a purely technical exercise.

We combine:

• Independent valuation analysis

• Scenario modelling

• Practical commercial judgement

Our work focuses on:

• Matching the valuation approach to the purpose

• Normalising earnings properly

• Stress-testing assumptions

• Making the conclusions understandable and defensible

We also help clients find the operational levers that impact value, not just share the report.

What Drives Value in Practice

Across industries, we see consistent drivers of stronger valuations:

• Predictable revenue and earnings

• Clean, timely financial reporting

• Low customer concentration

• Strong cash flow and working capital discipline

• Reduced reliance on key individuals

Improving these areas boosts earnings and often raises the multiple by lowering perceived risk.

Using Valuation as a Decision Tool

Valuation is most powerful when used proactively.

Rather than asking “what is my business worth today?” only at a transaction point, owners benefit from:

• Regular valuation readiness reviews

• Scenario testing under different market conditions

• Understanding how decisions affect value over time

This turns valuation from a static number into a practical planning tool.

Final Thoughts

Business valuation has evolved. It’s faster, more data-driven, and more sensitive to risk than ever before. The basics stay the same: value comes from sustainable cash flow, reliable forecasts, and strong positioning.

A good valuation adviser does more than crunch numbers. They help you understand what influences those numbers and how to use them for better decision-making.

At RJD Advisory, we provide independent business valuation services that support clearer thinking, stronger negotiations, and better outcomes.

📞 Book a free consultation today to discuss your business valuation and next steps.