Valuation is the process of determining the economic value of a business, asset or investment.
For example, a business broker values a landscaping company at $1.4 million using a 4x EBITDA multiple on the $350,000 in annual earnings — a common valuation approach in the industry that the seller uses as a starting point for negotiating with prospective buyers.
Why it matters: It dictates how much of the company a founder must give away to raise capital; maximizing valuation preserves founder wealth.
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