What is a business valuation?
A business valuation is a reasoned estimate of the value of a business or an interest in it, at a point in time, for a specific purpose. It is an opinion supported by analysis — not a guaranteed sale price.
When an independent valuation may be useful
- Before marketing a business for sale
- When assessing whether an asking price is justified
- For shareholder exits, buy-ins or disagreements
- For strategic planning and succession
- For divorce, tax, probate and other specialist purposes
Common valuation methodologies
Earnings-based approaches
A multiple applied to maintainable earnings (often EBITDA or adjusted profit). The most common approach for profitable trading SMEs.
Discounted cash flow
Projected future cash flows discounted to present value. Useful where growth or investment patterns are uneven, but highly sensitive to assumptions.
Asset-based approaches
Based on net assets, adjusted to market value. Relevant for asset-rich, property or holding businesses, or where earnings are weak.
How earnings, assets, growth and risk affect value
Value reflects the sustainable earnings a buyer can expect, the risk attached to them and the assets needed to generate them. Customer concentration, owner dependency, contract terms, recurring revenue and working capital needs all move value up or down.
What information is needed
- Three years of statutory or management accounts
- Current year-to-date figures
- Details of owner remuneration and one-off costs
- Key contracts, leases and customer information where relevant
What you receive
A written report within the agreed scope, setting out the purpose, information relied upon, methodology, key adjustments, assumptions and an indicative valuation range.
What the report does not cover
Unless separately agreed, a valuation does not include an audit, legal or tax advice, a verification of supplied information, brokerage or transaction execution. It is not a guarantee that a buyer will pay the stated value.