Valuing your business: valuation methods before a sale

There is no legal formula for determining a company's value. There are methods, each yielding a different result. The French Public Finances Directorate (DGFiP) states this in its valuation guide (2026 edition): there is no legal framework defining how to calculate the market value of securities. Bpifrance Création adds that valuation means assessing what constitutes a company's value, not setting a price.

This page presents the main categories of methods, the tax authorities' position, and a fictitious numerical example. It provides no valuation for your company, no sector multiples, and no discount rates: the sources consulted do not publish these. It also does not address the taxation of the sale.

Value and price: two different concepts

Bpifrance Création writes: "Evaluation consists of appreciating what constitutes the value of the company, not setting the price!" (page published in September 2021). The same page acknowledges a degree of subjectivity.

The three families of methods

Bpifrance Création distinguishes three categories.

Source: Bpifrance Création, «Business valuation methods» (September 2021).

What the tax authorities say

In June 2026, the French Public Finances Directorate (DGFiP) published the 2026 edition of its guide "Valuation of Businesses and Company Securities". Five useful benchmarks for a manager.

• The guide is not a standard. He clarifies that he does not provide "mechanically applicable" formulas.
• The tax is based on the market value. There is no "tax value" of securities.
• Market value is a value of transfer, not of ownership. The guide states that "the administration cannot accept a holding value".
• Priority is given to comparable transactions on the same securities. The guide states that valuation by comparison should be implemented as a priority. Transactions are only considered if they are "intrinsically similar": securities of the same company, comparable nature and quantities, similar timeframe, market value without a convenience price, and comparable terms. In principle, a transaction older than 24 months is not considered. If this is not possible, other methods can be implemented and combined.
• Reference date. The reference balance sheet is generally that of the last financial year closed before the triggering event. Provisional accounts or similar information may shed light on the outlook.

Preparing for the assessment: diagnosis and reprocessing

The guide begins with a diagnostic assessment: activity, business model, environment, resources, and risks. It then proceeds to reassess accounts: finance leases, non-standard compensation, rents, tax depreciation, and non-recurring expenses and revenues. It cautions against a purely mechanical approach based solely on the last three tax returns.

It also distinguishes between EBITDA (the French method) and EBITDA, which is not standardized. Accounts and reports are considered more objective than sales documents and business plans, which can be optimistic. Bpifrance Création cites an average of one to two years to correct negative points and recommends, if possible, "a competent professional who is neutral with respect to both parties involved.".

The flow methods, described in the guide

The guide begins by distinguishing between enterprise value and equity value. The latter is the amount returned to shareholders after debt repayment. It can be obtained directly or by calculating enterprise value and then deducting net financial debt and other factors.

Capitalizing on a normative result. The guide provides the following formula: normative result × (1 + g) / (t − g), where t is the capitalization rate and g is long-term growth. The normative result is a restated cash flow, after theoretical corporate tax, which reflects recurring performance. The method assumes a mature business, and g must not significantly exceed nominal GDP growth. To construct the rate t, the guide indicates that the risk-free rate can be the yield on 10-year French government bonds (OATs) and mentions a beta that represents the systematic risk of the business. It allows specific premiums, such as size or country risk, provided they are neither automatic nor redundant.

Discounted cash flows (DCF). Enterprise value is the sum of discounted future cash flows and a discounted terminal value. The explicit time horizon is frequently three to five years. Management rarely receives forecasts; it examines the business plans presented to it, without accepting them without analysis.

The guide also covers the multiples method, income valuation, the asset-based approach (goodwill, positive equity, deferred tax liabilities), and combining methods. This page does not reproduce the content of these methods; please refer to the guide.

Weighting of methods

For unlisted securities transferred upon death, the BOFiP (BOI-ENR-DMTG-10-40-10-40, version of 02/05/2019) states that the value results from a weighting of several methods, taking into account the nature and size of the company and the decision-making power attached to the securities. It cites the mathematical (asset) value, the earnings values, and the premium. This text concerns an inheritance: it simply illustrates how the BOFiP reasons, through the weighting of methods.

Discounts and bonuses

The section of the guide dedicated to discounts lists: control premium and minority discount, illiquidity discount, size discount, discount related to legal or contractual constraints, key man discount, holding company discount, and discount for deferred tax liabilities. The guide reminds readers to avoid duplication between these discounts and the consideration of risk in cash flows. This page does not publish any discount rates.

The ruling on value: a framework limited to gifts

The BOFiP (BOI-SJ-RES-10-20-20-90, published on September 12, 2012, with no posted updates) describes a ruling concerning the valuation of a business. It addresses the early transfer, i.e., the gift, of all or part of the business or its shares by a person holding a management position. Non-operating holding companies are excluded. This text dates from 2012, with no posted updates, and still mentions the wealth tax (ISF): check with the tax authorities to ensure the procedure still applies. The tax authorities will respond within six months: "However, the silence of the tax authorities after this period does not constitute tacit agreement." If the response is favorable, the valuation is enforceable if the deed is signed or registered in accordance with the draft within three months of the response.

Company valuation: numerical example (fictitious profile)

Situation. Claire, a fictional manager of a service company, is considering selling her shares. Assumptions of the fictional profile, unrelated to market data: normalized net income of €300,000, long-term growth of 1.5%, revalued assets of €2,900,000, debts of €800,000.

Issue. What equity value should be used?

Strategy. Apply two methods to the same company: the asset-based reading (assets less liabilities) and the capitalization of the normalized result with the formula in the guide, varying the rate t between 11 % and 13 % (fictitious assumptions), then an average with equal shares, as an illustration.

Result.

With the same result, a two-point interest rate shifts the yield value by several hundred thousand euros: between t = 11 % and t = 13 %, the difference is €557,437. Bpifrance Création highlights this limitation of yield calculation methods: the chosen rate or multiple may seem arbitrary. Equal weighting is not a rule: the BOFiP (French Official Tax Bulletin) does not specify any numerical weighting. This is a fictitious profile, based on hypothetical values; no results are guaranteed.

Business valuation: what changes depending on your situation

• The nature of the activity. The guide associates capitalization with a mature activity; Bpifrance Création considers the scales appropriate for business transfers that have an official rating.
• The quality of your accounts and your reprocessing.
• The purpose of the evaluation. Negotiations with a buyer, gifts, or inheritances do not involve the same legal texts.
• The company's legal structure and the rights attached to the securities, which are included in the weighting (BOFiP) and in the discounts (guide).
• The date of the operation, since the value is assessed on the date of the triggering event.

The rule depends on your situation. No value or result is promised.