How Much Is My Business Worth? A UK Seller's Guide

Putting a price on your business is the single most important decision you will make as a seller. Set it too high and you scare off serious buyers; too low and you leave money on the table. This guide explains how experienced business transfer agents arrive at a figure.

The profit multiple method

Most small and medium UK businesses are valued as a multiple of their adjusted net profit (sometimes called seller's discretionary earnings). A profitable, established business might sell for anywhere between 2 and 5 times its adjusted annual profit, depending on the sector, how reliable the earnings are, and how dependent the business is on the current owner.

"Adjusted" is the key word. Before applying a multiple, an agent will add back costs that a new owner would not necessarily incur - the current owner's salary, personal motoring, pension contributions, and one-off or discretionary spending. These add-backs can significantly increase the profit figure the valuation is based on.

The turnover multiple method

Where profit is low, inconsistent, or hard to verify, agents sometimes use a fraction of annual turnover instead. This is common in sectors with predictable revenue. A turnover multiple is a blunter tool than a profit multiple, but it provides a useful sense check.

Asset-based value

Some businesses are worth more for what they own than what they earn - for example a freehold property, plant and machinery, or stock. In these cases the tangible asset value can set a floor under the price, with goodwill added on top.

What moves the number up or down

• Clean, verifiable accounts and clear record keeping
• A diversified customer base rather than reliance on one or two clients
• Long, assignable leases or freehold premises
• Low dependence on the owner - a business that runs without you is worth more
• Growth trend and recurring or contracted revenue

The fastest way to get an indicative figure is to use our instant valuation tool, then speak to a local agent for a confidential, formal valuation that reflects the specifics of your business.