What is my business worth? The UK guide

What this guide covers

A practical answer to the most common question we get from UK SME owners: what is my business actually worth?

This guide walks through the three drivers that explain almost every valuation - profitability, growth and risk - and shows how they combine into a defensible number a buyer, HMRC or a co-shareholder would accept.

It is written for UK trading companies typically valued between £500k and £25m. It is not a substitute for a formal valuation, but it should let you sense-check any number you have been quoted and understand where it comes from.

The short answer

A UK private business is worth what a willing buyer would pay a willing seller on a given day, with full information and no compulsion on either side. That figure depends on three things:

• The sustainable profit the business generates today
• The growth a buyer can reasonably expect from that profit base
• The risk that the profit does not materialise as expected

Everything else - the methodology, the comparables, the discounts - is just a structured way of pricing those three drivers.

The three drivers of value

1. Profitability

The starting point of almost every UK SME valuation is sustainable EBITDA - earnings before interest, tax, depreciation and amortisation, adjusted for items a new owner would not bear.

Typical adjustments:

• Owner remuneration above or below a market salary
• One-off legal, restructuring or COVID-era costs
• Personal expenses run through the company (car, travel, family)
• Rent paid to a connected party at non-market rates
• Revenue or cost items that will not recur (insurance claims, grants)

The resulting number is sometimes called adjusted EBITDA or maintainable earnings. It is the figure a buyer would underwrite, not the statutory profit shown in the accounts.

2. Growth

Two businesses with identical EBITDA can be worth very different amounts depending on where their earnings are going.

A buyer pays a higher multiple for:

• A clear, evidenced track record of revenue and margin growth
• A pipeline that supports forward growth (signed contracts, recurring revenue, regulatory tailwinds)
• A market that is itself expanding

A buyer pays a lower multiple when growth has stalled, when the recent trajectory is flat, or when the forward plan depends on assumptions a third party cannot verify.

3. Risk

Risk is the great compressor of value. It is what separates a 4x EBITDA business from a 9x EBITDA business in the same sector.

The risk factors UK buyers price in most heavily:

• Customer concentration - if the top customer is more than 20-25% of revenue, the multiple drops
• Key-person dependence - if the owner is the relationship, the technical lead and the rainmaker, the business is harder to transfer
• Earnings quality - recurring or contracted revenue is worth more than project work
• Supplier concentration - single-source supply chains carry a discount
• Regulatory exposure - pending changes in policy, licensing or tax treatment
• Working capital intensity - businesses that consume cash to grow are valued lower than those that throw it off

How a UK SME valuation is actually built

Most defensible valuations combine two or three methods, cross-check the results, and land on a range rather than a single point.

Method 1: Earnings multiples (the default)

For profitable trading businesses, the dominant method is EBITDA multiples benchmarked against:

• Listed comparables - quoted companies in the same sector, adjusted down for size and liquidity
• Recent private transactions - M&A deals in the same sector, sourced from databases such as Mergermarket or Pitchbook
• Sector benchmarks - published multiples from advisory firms and trade bodies

The valuer picks a multiple range, applies it to adjusted EBITDA, then adjusts for net debt and surplus assets to get equity value.

Method 2: Discounted cash flow (DCF)

DCF is used as a sanity check, or as the primary method where:

• Forecasts are reliable and supported by signed contracts
• The business has a defined investment horizon (infrastructure, energy, long-cycle contracts)
• Earnings are growing quickly enough that a trailing multiple under-states value

DCF discounts forecast free cash flows back to today using a weighted average cost of capital (WACC). It is sensitive to the assumptions, so it almost never stands alone for a UK SME.

Method 3: Net asset value (NAV)

For asset-heavy or loss-making businesses, NAV provides the floor. A trading business should always be worth at least the realisable value of its assets, less liabilities, less the cost of an orderly wind-down.

NAV is rarely the primary method for a profitable trading company, but it is the starting point for property companies, investment holding companies, and businesses in distress.

Putting the methods together

The output is usually a range, not a point estimate. A typical conclusion looks like:

> "On the basis of adjusted EBITDA of £620k, a peer multiple range of 5.5x-7.0x, and net cash of £180k, we conclude an equity value range of £3.59m-£4.52m, with a central estimate of £4.05m."

That range is what gets negotiated against a buyer's offer, defended in front of HMRC, or used to size an EMI option pool.

What drives the multiple

Two businesses with identical EBITDA in the same sector can attract very different multiples. The factors that move the multiple up or down:

A useful internal exercise: score your business against this table before you commission a valuation. It will not give you the number, but it will tell you which end of the typical range you should expect.

When a number is not the answer

The figure produced by a valuation depends on why the valuation is being done. The same business can be worth different amounts in different contexts:

This is why two valuers can produce two different numbers for the same business without either being wrong - they may be answering different questions.

Common owner-side mistakes

Worked example

A UK B2B services company:

• Revenue £4.2m, growing at 12% per year
• Statutory PBT £480k
• Owner taking a £60k salary on what the market pays at £140k
• Top customer 18% of revenue, top three 40%
• Management team in place under the founder

Step 1 - rebuild EBITDA:

• Statutory PBT: £480k
• Add back depreciation and amortisation: £75k
• Add back excess owner remuneration: -£80k (raise salary to market)
• Add back one-off legal costs: £35k
• Adjusted EBITDA: £510k

Step 2 - pick a multiple:

• Sector range for sub-£10m B2B services: 5x-7x EBITDA
• Customer concentration above 15%: push toward the lower end
• Strong growth and management team in place: push toward the higher end
• Selected range: 5.5x-6.5x

Step 3 - enterprise to equity:

• Enterprise value range: £2.81m-£3.32m
• Add net cash of £180k
• Equity value range: £2.99m-£3.50m

Step 4 - sanity-check with DCF:

A 5-year DCF using the company's own forecast lands at £3.18m. The result sits comfortably inside the multiples range, so the conclusion holds.

Central estimate: £3.20m, with a defensible range of £2.99m to £3.50m.

FAQ

Related guides

• EMI valuation guide - how a tax-compliant valuation for EMI options is built
• What is HMRC SAV? - the HMRC team that reviews UK share valuations
• UMV vs AMV explained - the two values that appear on every employment-related valuation