Have you ever asked yourself, “What’s my business actually worth?”
You’re not alone. Whether you’re thinking about selling one day, bringing in a new partner, or just curious about your progress, it’s a smart question to ask.
And as accountants who work with business owners every day, we’re here to make it simple.
In this blog, we’ll explain:
- When you might need a business valuation
- What we look at when working out your business’s value
- Why it’s not all about the numbers
- How to get started (without any scary jargon)
What Is a Business Valuation?
A business valuation is just a way of working out how much your business is worth. It also gives us the value of your shareholding in your company.
It’s not one single magic number, it depends on what your business does, how it performs, and why you’re looking for a valuation in the first place.
But when it’s done properly, it gives you a solid picture of where you stand, and clarity.
When Do I Need a Business Valuation?
You might think business valuations are just for people selling up—but that’s only part of the story. Here are some of the most common reasons:
1. You’re planning to sell your business
This is the big one. If you’re thinking of selling now or in the future, knowing your value helps you plan, and makes sure you don’t sell yourself short.
It’s also useful to know what your valuation is now, and where you need to get to if you’ve got a specific value in mind for the future.
2. You’re bringing in a new business partner or investor, or saying goodbye to a business partner
If someone’s buying a share of your business, a valuation helps you both agree on what’s fair.
Similarly, if one of the company shareholders is leaving, you’ll need a valuation to come to an agreement on how you part ways.
A business valuation is essential if you’ve decided on the company buying back the exiting shareholder’s shares, and you can find out more about the buyback process here.
3. You’re going through a big life event
Things like divorce, passing on the business to family, or sorting out inheritance often involve needing a business value.
4. There’s a disagreement between shareholders
When people disagree, it helps to have a clear, independent valuation to work from.
5. You just want to know how you’re doing
Think of it like a business health check. If you’ve been growing, investing, and working hard, a valuation shows the results, and where you could grow more.
What Do Accountants Look At in a Business Valuation?
Good question! We don’t just pull a number out of a hat. Here are some of the key things we look at:
1. Your turnover and profit
That’s your income and how much money your business is actually making after expenses. But we don’t stop there.
2. Your business assets
This means things your business owns, like stock, equipment, vehicles, or property.
3. Your debts
If the business owes money (like loans or unpaid bills), that affects your value too.
4. Your cash flow
This is all about how money moves through your business. Are you bringing in enough to cover your costs each month? Is it reliable?
5. Your customers and contracts
Got loyal customers who keep coming back? Long-term contracts? Have a great reputation? Those add value, because they show stability.
This is also known as goodwill in your business.
6. Your team
Is your business all about you, or could it run without you? If you’ve built a strong team, that makes it more valuable to someone else.
7. Your industry and market
We look at what’s happening in your industry, how competitive it is, and whether your business is in a good spot to grow.
8. Technology and processes
If you’re up to date with innovations, technology and processes that are key to driving your industry forwards, this will be taken into account.
Can I Just Use a Profit Multiplier?
You might’ve heard people say “just multiply your profit by 3” or something similar.
But the truth is, it’s never that simple. Some businesses sell for 1x their profit. Others sell for 5x or more.
It depends on all those other things we talked about: your customers, your team, your industry, your cash flow, and why someone would want to buy or invest in your business.
What If I Don’t Understand the Numbers?
You don’t need to!
That’s our job. We’ll explain everything in plain English, and we’ll take the time to talk through what the numbers mean for you. Our values include Keep it Simple, and Share Knowledge so you can bet that we’ll be leaning into these to help you here!
We’ve worked with lots of business owners who didn’t feel “finance-savvy” before, and now feel confident and in control.
How Much Does a Business Valuation Cost?
It depends on how complex your business is and what you need the valuation for. For a simple check-in valuation, we can often give you a ballpark figure pretty quickly. If you need something formal or HMRC-approved, it takes a little more work.
Either way, we’ll always talk it through with you first, so you know exactly what to expect.
Ready to Find Out What Your Business Is Worth?
Whether you’re thinking of selling, planning ahead, or just curious, we’d love to help.
We’re friendly, straight-talking accountants who believe business advice should be practical and stress-free. If you’re ready to get started, or just want a quick chat, get in touch here.
