Enterprise value vs equity value: the difference that costs founders millions

Not every multiple lands on the same number

Before anything else, know what your multiple is measuring. There are two families.

Enterprise-value multiples such as EV/Revenue and EV/EBITDA value the business, so the output is enterprise value, and to find what you take home you still subtract net debt. The four lenses in our valuation guide aren't multiples themselves; they are the metrics, like revenue growth and gross margin, that each point to an EV/Revenue multiple. So everything in that guide lands in this family.

Equity multiples, most commonly P/E, or price-to-earnings, start from the share price and from earnings measured after interest, so the output is equity value directly. No bridge needed.

This article is about the first family, the EV multiples most founders use, because that is where the expensive confusion happens. If someone hands you an "8x revenue" number, they have given you enterprise value, and you are not done yet.

The number an EV multiple gives you isn't the number you take home

When you run a revenue or EBITDA multiple, the figure that comes out is enterprise value: the value of the business itself, its operations, its customers, its ability to generate cash, regardless of how it is financed.

But you don't sell "the business" in the abstract. You sell your shares. And the value of your shares is what is left after the company's lenders are paid. That is equity value, and it is almost always a different number from the one the EV multiple produced.

This is the single most common technical mistake we see founders make: They take an enterprise value, treat it as their payout, and build their expectations on it. Then the term sheet arrives, net debt gets subtracted, and the number shrinks.

What is enterprise value, simply explained

Enterprise value is the total value of a company's operations, what a buyer pays for the business as a going concern. It is the output of an enterprise-value multiple: revenue × your revenue multiple, or EBITDA × your EBITDA multiple.

Picture selling a house. The agreed price of the house is its enterprise value, what the property itself is worth, the number on the listing. But whether that price is what you pocket depends on if you have a mortgage or not.

What is equity value, and the net debt bridge

Equity value is the value of your shares, what the owners actually walk away with once the company's debts are settled. You get from one to the other with a single, crucial adjustment:

If there is a mortgage on the house, the bank is paid first, so what reaches you is the price minus what you owe. A business works the same way: Subtract its debt, then add back its cash, because you are handing over money already in the bank. Two consequences founders miss. If you carry more cash than debt, a net cash position, your equity value is actually higher than your enterprise value. And if you have taken on significant debt, your equity value can be dramatically lower, even though the business is worth the same enterprise value.

The P/E-style equity multiple from earlier skips this bridge entirely and lands on equity value directly.

A worked example: from enterprise value to your cheque

Take the company from our four-lens valuation guide: DKK 5M revenue, with a four-lens enterprise value range of DKK 23M–DKK 42.5M. Say a buyer agrees on an enterprise value of DKK 34M.

Same business. Same enterprise value. A DKK 6M swing in what the owners receive, driven entirely by the balance sheet.

And there is one more step the headline never shows: Equity value is split across everyone who owns shares. Staying with Scenario A's DKK 31M equity value, if you own 50% of the company after raising capital, your share is roughly DKK 15.5M, not DKK 34M. The gap between the number a buyer quotes and the number that lands in your account is exactly what this lens is about.

Why this costs founders millions

"We sold for DKK 34 million" and "I received DKK 34 million" are two completely different statements. The acquisition headline almost always refers to enterprise value. Your proceeds are equity value, multiplied by your ownership stake, after any preferences or option pools are settled.

Walk into a negotiation quoting enterprise value as your expected proceeds and you will either anchor yourself too high and be disappointed, or signal to a sophisticated buyer that you don't know how the math works. Knowing the bridge keeps you credible and keeps your expectations honest.

The takeaway

First, check what kind of multiple you are holding. An EV multiple such as EV/Revenue or EV/EBITDA gives you the worth of the business; an equity multiple such as P/E gives you the worth of the shares directly. If it is an EV multiple, subtract net debt to reach equity value, then apply your ownership stake to reach the cheque you actually take home. Skipping those steps is how founders end up surprised at the closing table.