Enterprise Value

Enterprise Value (EV) represents the total value of a business, including both the equity held by shareholders and the debt owed to creditors.

Enterprise Value Formula

Enterprise Value = Equity Value + Total Debt - Cash

Or equivalently:
Enterprise Value = Market Cap + Debt + Preferred Stock + Minority Interest - Cash

EV vs. Equity Value

Concept	What It Represents
Enterprise Value	Total cost to acquire the business
Equity Value	What shareholders receive in a sale

Example:

• Enterprise Value: $5,000,000
• Debt at closing: $1,500,000
• Cash at closing: $200,000
• Equity Value: $5M - $1.5M + $0.2M = $3,700,000

Why EV Matters in SMB Deals

1. Purchase price negotiations use EV
2. Multiples (EV/EBITDA) allow comparison across capital structures
3. Debt capacity determines how much equity is needed
4. Working capital adjustments affect final equity payment

Typical Deal Structure

Enterprise Value:        $4,000,000
- Senior Debt (SBA):    ($2,800,000)
- Seller Note:           ($400,000)
= Equity Required:        $800,000