Enterprise Value
Written by Christopher Krassnig - Founder - Kairos Exchange and ZenoX Media.
Published
- Checks in every memo8
- Automatic on day one3 of 8
- Read by handad spend and processor payouts
- Tracked ecom salesEUR 200M+ZenoX ad-management figures, not Kairos deal volume - Kairos hasn't closed a deal yet.
Enterprise Value is the total value of a business, its equity plus its debt, minus its cash on hand. Buyers use it to compare companies regardless of how each one is financed. Most Shopify store sales are asset deals with no debt attached, so the asking price and the enterprise value are usually the same figure. The gap only opens once debt enters the deal.
A Worked Example
Take a store with 300,000 dollars in equity value, no debt, and 20,000 dollars in cash. Its enterprise value is 300,000 minus 20,000, or 280,000, and because the deal is an asset sale with no debt, the asking price usually lands at that same 280,000. A larger acquisition that assumes an outstanding loan works differently: 300,000 dollars in equity value plus 50,000 dollars of assumed debt, minus the same 20,000 dollars in cash, prices the business at 330,000 in enterprise value, a figure the equity price alone never shows. Buyers reach for enterprise value, not the sticker price, whenever the businesses being compared do not carry the same debt.
Not to Be Confused With
- Asking Price
- Asking price is what a seller requests for one specific deal; enterprise value is the debt-and-cash-adjusted figure used to compare businesses generally.