Methodology
How Upswitch values an SME
A defensible valuation is not the one with the best methodology. It is the one you can explain, reproduce and defend across a table. Five principles drive how we build every Upswitch valuation.
Five principles
1. Ten methods in parallel. Never one.
Every valuation runs the full method set: DCF, EBITDA-multiple, revenue-multiple, ARR-multiple (SaaS), SDE (owner-operator), adjusted NAV, fiscal reference (BE), the Upswitch adaptive market approach, liquidation analysis, and a dedicated startup engine. The user picks which result is the headline; every other method stays as a sanity check, visible in the audit trail.
2. Normalisation on canonical rules
EBITDA is normalised on six standardised categories: market-rate owner compensation, one-offs, non-operating items, working-capital corrections, maintenance capex vs depreciation, intercompany / related parties. Every adjustment is logged with a value, a rationale and a source. The same rules applied to every file, every year, every advisor.
3. Coverage scoring per method
Not every method works on every file. A DCF needs a credible forecast; an ARR-multiple needs recurring revenue; an EBITDA-multiple breaks on pre-EBITDA businesses. Each method carries a coverage score derived from the data. High-coverage methods drive the headline; low-coverage methods stay as cross-checks, never as the primary signal.
4. Sensitivity on the levers that matter
For every method, the top 5 parameters that drive the outcome are surfaced explicitly: growth, EBITDA margin, discount rate, multiple, working capital. The user (and counter-party) can see exactly how much each lever moves the result. A fundamentally more productive negotiation than arguing single point estimates.
5. Audit trail. Every adjustment.
Every normalisation, every method override, every parameter override is logged with the advisor name, timestamp, value and rationale. A counterparty's advisor can fully reproduce the file in their own environment without ever calling you. That reproducibility is what makes the valuation defensible. Not the exactness, but the transparency.
Where the data comes from
The Upswitch Index aggregates three evidence types per business type: private-market transaction data normalised to EV/EBITDA and EV/Revenue; FMP (Financial Modeling Prep) financial database inputs for sector context; and Damodaran public-equity multiples as a calibration anchor. SME-specific weights reduce listed-market bias before each vintage is published, with MAD-based outlier detection per sector and metric. Full canonical methodology is on the Upswitch Index page below.
The ten methods in detail
Each of the ten valuation methods has its own page with what it is, when to use it, and how Upswitch applies it. Comparison pages run the most common method-pairings side by side.
Explore the ten methods →The manifesto behind the methodology
A reproducible audit trail is one of five primitives in our broader thesis on European SME succession. The full manifesto explains why each primitive matters, and why this stack is what unlocks European SME liquidity.
Read the manifesto →Frequently asked questions
Why ten methods instead of one?
Because no single method is reliably the best across all SME business types. EBITDA-multiple breaks on pre-EBITDA businesses; ARR-multiple makes no sense without recurring revenue; DCF requires a credible forecast. Running all ten and weighting them via coverage scoring captures whatever the data actually supports, and surfaces ambiguity instead of hiding it.
Is the methodology open?
Yes. The canonical methodology is published on the Upswitch Index methodology page (linked above). Every adjustment in a valuation is logged with rationale and source. A counterparty advisor can fully reproduce the file without your help.
How often is the underlying multiples data updated?
The Upswitch Index publishes new vintages periodically through the year. Each publication is permanently versioned and citable, so a number quoted in a report stays stable even after the Index itself updates. Historical vintages remain accessible for trend analysis on the Pro plan.
How does Upswitch compare to Damodaran or Bloomberg/CapIQ?
Damodaran covers listed equities globally. Bloomberg / CapIQ are paid, gated, listed-equity-centric. The Upswitch Index is private-market, SME-weighted, by business type and country, free with a free account, and citable per published vintage. They answer different questions; we use Damodaran as a calibration anchor, not as primary input.
Why does owner compensation matter so much in normalisation?
Because owner pay in family businesses is fiscally optimised, not market-rate. The buyer takes over the business, not the previous owner's tax structure. Normalising to a market-rate CEO salary can move EBITDA 15 to 25%, which on a 5× multiple is €750k to €1.25M of valuation movement before any multiple discussion. We log it on canonical rules across every file.
See it in practice
Run a defensible valuation in ten minutes. Free with a Upswitch account, no credit card.