How much is my business worth? A practical guide for UK founders

Your business is worth what a buyer is prepared to pay for the earnings, assets and opportunities they can take over, with an allowance for the risks they inherit. For an established, profitable company, a useful starting point is sustainable earnings multiplied by a defensible valuation multiple. That starting point is not the same as the money you will receive.

You also need to understand debt, cash, working capital and the terms of the offer. A £2 million headline with a large conditional payment can be a very different proposition from £2 million payable at completion.

The aim is not to find one flattering number. It is to build a range you can explain, identify what could move it, and avoid confusing company value with personal proceeds.

Start by defining what you are valuing

Are you selling the shares in a company, selected business assets, or a minority interest? Those are different transactions. This guide focuses on a negotiated sale of an operating private business; it is not a formal valuation for tax, litigation or financial reporting.

Two terms matter immediately:

• Enterprise value describes the value of the operating business, commonly discussed on a cash-free, debt-free basis with an agreed normal level of working capital.
• Equity value is the value attributable to shareholders after the agreed adjustments between enterprise value and the shares being sold.

Even equity value is not automatically your personal cheque. Shareholdings, deferred consideration, fees, tax and other contractual deductions still matter. In an asset sale, the company may receive the price rather than you receiving it personally. GOV.UK explains that a limited company's asset sale can create a corporation tax liability; taking money out of the company is a separate question.

Before discussing multiples, establish the transaction and what the number means.

Which business valuation method should you use?

There is no single method suitable for every company. Common approaches include discounted cash flow, asset-based valuation and comparable company analysis. In practice, more than one perspective can be useful.

A loss-making company with valuable intellectual property is not automatically worth nothing. Equally, a profitable company does not automatically deserve a technology-company revenue multiple because it uses software.

Choose the method to fit the business, not the number you hope to reach.

Calculate earnings a buyer can actually inherit

EBITDA means earnings before interest, tax, depreciation and amortisation. Buyers may use an adjusted or normalised EBITDA figure to assess the business's ongoing trading performance.

Start with reconciled accounts. Then identify costs or income that genuinely do not represent the ongoing business. An adjustment needs evidence and an explanation, not just a label saying “one-off”.

The exercise works in both directions. A genuinely exceptional legal cost may support an addition. An owner doing a full-time management job for below-market pay may require a deduction for the cost of replacing them.

EBITDA is also not cash flow. Equipment replacement, capitalised development, tax, interest and working capital can all create cash demands outside it. Look beyond the headline measure when assessing what the business can sustainably generate.

Your question is: What level of earnings could a buyer reasonably expect after paying the people and costs needed to run the business?

Find a multiple you can defend

A multiple is a shorthand for expectations and risk. Two businesses with the same EBITDA can attract different offers because the quality and transferability of those earnings differ.

Relevant questions include:

• Is revenue growing, stable or declining?
• Are customers contracted, repeat buyers or one-off purchasers?
• What happens if the largest customer leaves?
• Can the management team run the business without the founder?
• How much reinvestment is needed to sustain performance?
• Does the buyer gain capabilities or market access they particularly value?

This is why “businesses in my sector sell for five times profit” is not enough. You need to know which businesses, when they sold, what profit measure was used, what the price included and whether the terms were comparable.

Public-company trading multiples, large acquisitions and smaller private-company sales are not interchangeable. A disclosed acquisition price is not automatically enterprise value. If you cannot establish the basis, treat the example as context rather than a direct valuation benchmark.

A worked valuation example

Consider an illustrative company with £400,000 of sustainable annual EBITDA. Assume a buyer and seller use a 4× multiple for the discussion. That multiple is chosen only to explain the arithmetic; it is not a market benchmark or a recommendation for your company.

This simplified example assumes working capital is delivered at the agreed target and there are no other adjustments. It is before fees and tax, assumes the whole company is being sold, and says nothing about how much is payable immediately.

Suppose completion working capital is £50,000 below the contractual target. If the purchase agreement provides for a pound-for-pound adjustment, the equity price would fall to £1,350,000. That is not the same as deducting all working capital from the price: the issue is the difference from the agreed target.

Now suppose part of the offer is an earn-out. You need another calculation showing what is certain, what is conditional, when it is paid and what you must do to receive it.

What can improve the value of your business?

Start with the weak points a buyer can substantiate, rather than trying to talk your way to a higher multiple.

Make the numbers dependable. Reconcile management accounts, explain margin movements and keep an evidence-backed adjustment schedule.

Make revenue understandable. Show customer concentration, retention, contract terms and the difference between booked work and a hopeful pipeline.

Make the business transferable. Put relationships, responsibilities and operating knowledge into a team and systems a buyer can inherit.

Make the growth case specific. Explain which opportunity is available, what it costs to pursue and what evidence supports it.

None of this guarantees a premium. It gives a buyer fewer reasons to discount the business or make payment conditional.

What to prepare before asking for a valuation

Gather your recent annual accounts, current management accounts, revenue and margin trends, debt and cash schedules, customer concentration, management responsibilities and a realistic forecast. Label forecasts as forecasts.

Write down your objectives too. Is the priority the highest possible headline price, cash at completion, a shorter transition, or keeping a stake in the next stage? Those objectives can lead you to different buyers and different acceptable offers.

Common questions about valuing a business

Is my business worth a multiple of revenue or profit?

It depends on the business and the available evidence. Revenue can be a reference point in some sectors, but it does not explain margins, reinvestment or whether the business makes money. Compare like with like and understand why a chosen metric is appropriate.

Can I value my business myself?

You can build an indicative range and identify the assumptions that matter. A sale, tax exercise or shareholder dispute may need an independent professional valuation for its specific purpose. An online estimate is a starting point, not a binding offer.

Does a higher offer mean I will receive more money?

Not necessarily. Compare cash at completion, conditional payments, retained equity, debt and working-capital adjustments, fees and tax. The largest headline is not always the best outcome.

General preparation guidance, not a formal valuation or personal tax advice. All figures in the worked example are hypothetical.