The value of a limited company before a sale is usually derived from three groups of methods — asset-based, income-based and market (comparative) — and the final price depends mainly on the firm’s ability to generate sustainable profit and cash, its dependence on the owner, and the state of its contracts and liabilities. A valuation is a starting point for negotiation, not a fixed figure. The core methods are the same in Slovakia and Czechia; what differs is how the sale is taxed.
Why value a company before selling?
A valuation gives the seller realistic expectations and arguments for negotiation, and it reveals weak spots that can still be fixed before the sale. It also serves as the basis for the due diligence the buyer will almost always carry out. A valuation also helps decide whether to sell the share or the company’s assets — each route has different tax and legal consequences.
For the wider context of running and strengthening a company, see our overview of professional accounting in Slovakia.
What are the main valuation methods?
The asset-based method uses the value of assets minus liabilities — suitable for asset-heavy firms but ignoring future earning potential. The income method values the firm by its ability to generate future profit or cash flow. The market method derives value from prices of similar companies actually sold.
For small and medium companies the income and market approaches are usually combined. Our note on Slovak tax advisory for companies is a useful starting point when structuring a sale.
How do the income method and EBITDA multiples work?
The income method either discounts future cash flows to present value (DCF) or applies a multiple of profit. In small business the most common is an EBITDA multiple — earnings before interest, taxes, depreciation and amortisation, multiplied by a coefficient reflecting industry, growth and risk.
A stable firm with a diversified client base earns a higher multiple; a risky, owner-dependent firm a lower one. The multiple is never universal, so it is worth knowing the range of multiples in your industry, not just a single number.
What most affects the value of a company?
The decisive factor is the sustainability of profit and cash, not a single good year. Buyers pay for predictable revenue, recurring contracts and low dependence on a single customer or on the owner personally. Clean accounting, clear ownership, protected trademarks and low debt raise value; lawsuits, tax arrears and unclear contracts lower it.
How is the sale of a share taxed — Slovakia vs Czechia?
The tax treatment differs markedly. In Slovakia, an individual’s income from selling a business share is taxable as other income (Section 8 of Act 595/2003); a company may be exempt under Section 13c if it holds at least 10% for at least 24 months and meets a substance test.
In Czechia, an individual is exempt after a 5-year holding test (Section 4 of the Income Tax Act) — and the CZK 40 million cap that applied in 2025 was abolished from 2026. A company may exempt the transfer of a subsidiary share under Section 19 with a 10% holding held for at least 12 months.
What to prepare before a sale?
Expect due diligence — a review of finances, contracts, assets and legal status. Prepare recent financial statements, a list of contracts, an asset register, loan balances and proof of share ownership. Separate private costs from company ones and resolve overdue receivables; these fixes take months.
Which mistakes lower the price most?
The most common mistakes are selling without preparation or valuation, overpricing based on one exceptional year, chaotic accounting, owner dependence, and leaving tax structuring to the moment of sale. Starting early with defensible numbers turns the valuation into a strong argument rather than just a figure on paper.
Thinking of selling your company but unsure what it is really worth? We prepare the valuation and the tax structure of the sale.
FAQ
Which valuation method suits a small limited company best?
For small firms the income method (especially an EBITDA multiple) is usually combined with the market method based on comparable companies actually sold. The asset method alone undervalues firms whose worth lies in customers and know-how rather than in assets.
Is the sale of a share always taxed?
It depends on the country and the seller. In Slovakia an individual is taxed under Section 8, while a company may be exempt under Section 13c (10%, 24 months, substance). In Czechia an individual is exempt after a 5-year test, and a company under Section 19 (10%, 12 months).
What increases a company’s value the most before a sale?
Predictable, sustainable profit, recurring contracts, low dependence on the owner and on a single customer, clean accounting and low debt. These reduce the buyer’s perceived risk and therefore raise the multiple they are willing to pay.