How to Value a UK Business: Four Worked Case Studies

The short version

There is no single formula. A UK private company is valued by identifying which basis of value applies, choosing the method or methods the business actually supports, and reconciling them into a range that a buyer, HMRC or a court can interrogate.

An EBITDA multiple is the default for a profitable, established trading company. It is the wrong lead method for a loss-making SaaS business, for a property holding company, for a one-person practice, and for a business whose earnings are about to change structurally. This guide works through four real-shaped cases and shows how the method changes with the business.

> Want an indicative number first? Use the Business Valuation Calculator for an earnings-based range, then read on to see whether that method fits your situation.

Step 0: the question before the method

Two questions decide everything that follows, and getting either wrong invalidates the work regardless of how good the arithmetic is.

What is the basis of value? A trade sale price, an HMRC market value for an EMI grant, an open market value under s.160 IHTA 1984 for probate, and a fair value in a shareholder dispute are four different numbers for the same company. See sale value vs tax value.

What is being valued? 100% of the equity, a 15% minority holding, a class of growth shares, or the trade and assets only. A minority holding is not 15% of the whole: it carries discounts for lack of control and lack of marketability.

Only once both are fixed does the choice of method become a technical question. The six recognised methods and their limits are set out in business valuation methods.

How the method follows the business

The rest of this guide works through four of these in full.

Case 1: established B2B services company

*Profile: £4.2m revenue growing 12% a year, owner still in the business but a management team in place, top customer 18% of revenue, net cash £180k.*

This is the textbook case for an earnings multiple, and roughly two thirds of UK SME transactions look broadly like it.

Building adjusted EBITDA

The starting figure is never statutory profit. It is what the business would earn under a new owner, on a sustainable basis.

The five standard adjustment categories are owner costs, related-party charges, one-off items, discretionary spend and run-rate normalisations. Each one must be evidenced: an unsupported add-back is the first thing a buyer's due diligence team removes, and every pound removed at 6x costs six pounds of headline price. Full mechanics in EBITDA adjustments.

Choosing the multiple

Sector sets the band; the specific business decides where inside it.

Seven factors move a business within its band: revenue predictability, customer concentration, growth, margin trajectory, owner dependency, scale, and consolidator activity in the sector. Here, concentration at 18% pulls down; consistent growth and an in-place management team pull up. Selected range 5.5x-6.5x. Sector evidence in UK SME EBITDA multiples 2026.

Enterprise value to equity value

Enterprise value is £2.81m to £3.32m. The seller receives equity value, and the equity bridge routinely moves the final cheque by 5-15%: deduct net debt, deduct debt-like items (deferred consideration, dilapidations, unfunded pensions, overdue tax, accrued holiday), adjust for working capital against the agreed peg, add surplus assets.

Here, net cash of £180k gives £2.99m to £3.50m, central estimate £3.20m. A five-year DCF on management's own forecast lands at £3.18m, inside the range, so the conclusion holds. What counts as debt-like is negotiated rather than defined - see net debt and cash-free, debt-free.

Case 2: owner-operated practice

*Profile: single-site consultancy, £680k revenue, owner works full time in delivery, two employees, £15k of personal costs run through the company, no management layer.*

An EBITDA multiple applied here overstates the answer, because the buyer is not buying a managed business. They are buying a job with goodwill attached.

The correct measure is seller's discretionary earnings: EBITDA plus one full-time owner's total remuneration and benefits, capitalised at 1.5x to 3.5x rather than 4x to 7x.

The two land in the same territory, which is the test that both have been applied correctly. Applying a 5x EBITDA multiple to an SDE figure would give £1.33m, and that error - endemic in broker marketing material - is the single most common source of unrealistic price expectations among small UK business owners.

What actually moves the number here: transferability. If the client relationships are personal to the owner, a buyer will structure most of the consideration as an earn-out. A valuation that ignores deal structure is only half an answer.

Case 3: recurring-revenue software business

*Profile: £1.9m ARR growing 45% a year, gross margin 82%, net revenue retention 108%, EBITDA negative £220k because sales and marketing spend is being pushed hard.*

An earnings multiple returns a negative enterprise value. That is not a finding about the business; it is the wrong method.

Value is priced on annual recurring revenue, with the multiple driven by growth rate, gross margin and retention. A useful discipline is the Rule of 40: growth rate plus EBITDA margin. Here 45% growth minus a 12% EBITDA margin gives 33 - solid, not exceptional.

An ARR multiple of 3.0x-4.5x gives £5.7m to £8.6m. A DCF built on a path to 20% EBITDA margins by year four should be run as a cross-check; if it lands materially below the ARR range, the growth assumption is doing too much work.

The trap: revenue multiples used outside recurring-revenue contexts. A 1x revenue rule of thumb applied to an agency or a distributor implies wildly different earnings multiples depending on margin, and no buyer prices that way.

Case 4: property and investment holding company

*Profile: three commercial units held for rental income, £3.4m book value, £2.9m acquisition cost, £1.6m of bank debt, rental profit £145k after costs.*

An earnings multiple on £145k would produce a fraction of what the assets are worth. Value sits in the balance sheet, so net asset value leads.

Three points decide the answer. First, the properties must be at open market value from a qualified surveyor, not at historic cost. Second, deferred tax on the latent gain is a real deduction to a share buyer, and is routinely negotiated at somewhere between 50% and 100% of the full liability. Third, the basis must be stated: a break-up NAV deducts realisation costs, lease exit provisions and redundancy, and typically sits 20% to 30% below a going-concern NAV.

A yield cross-check on the rental stream - £145k capitalised at a market yield for the asset class and location - tests whether the surveyor's values are consistent with the income being produced.

For a profitable trading company, NAV is not the answer but it is the floor. If an earnings valuation lands below NAV, the earnings basis is telling you the trade is destroying value.

Reconciling methods that disagree

A defensible valuation uses two or three methods and concludes on a range. Where they diverge sharply, the divergence is the finding:

• Earnings well above NAV - normal for a healthy trading business; the gap is goodwill and is already inside the multiple, so it is never added on top.
• Earnings below NAV - the trade is not earning its asset base. Value on assets and consider whether a break-up is the rational outcome.
• DCF well above the multiple - the forecast is carrying the valuation. Test it against the historic record before relying on it.
• DCF well below the multiple - either the trailing earnings include something unsustainable, or the discount rate is overstating specific risk.

Weighting methods by arbitrary percentages is not analysis. State which method leads, why, and what the others tell you about the risk around it.

Why a calculator is not a valuation

A calculator applies your assumptions. A valuation tests them. The five things a buyer, HMRC or an opposing expert will challenge:

1. The add-backs. Every one needs documentary support. Unevidenced adjustments get stripped out.

2. The comparables. A multiple lifted from a broker's marketing material is not evidence. Comparables must match in size, sector and structure.

3. The forecast. If the valuation leans on growth, the historic record has to support the claim.

4. The debt-like items. Buyers find liabilities sellers had not classified as debt. Each one comes straight off the price.

5. The purpose. A sale value, an EMI value and a probate value are three different numbers for the same company.

Valuation by purpose

Two valuers can reach two different numbers for the same company without either being wrong. They may be answering different questions.

FAQ

Related guides

• Business valuation methods - the six recognised methods in detail
• Business Valuation Calculator - indicative equity value in two minutes
• EBITDA adjustments - how buyers normalise SME accounts
• UK SME EBITDA multiples 2026 - sector benchmarks
• Net debt and cash-free, debt-free - the equity bridge
• How buyers value UK SMEs - the buyer's perspective
• Sale value vs tax value - why purpose changes the number