Business valuation guide
How much might your business be worth?
There is no universal multiple that values every business correctly. An informed assessment considers the earnings basis, assets, market evidence, transferability, risk and the conditions in a particular industry.
Start with a reliable earnings basis
Revenue alone does not explain what a business earns or how transferable those earnings may be. A professional may examine reported profit, owner remuneration, one-off items, non-business expenses and the level of working capital required to operate.
- Use consistent accounting periods
- Document every proposed adjustment
- Separate recurring and one-off results
- Explain material changes rather than hiding them
Market-comparison methods
Comparable sales and current listings can provide context, but the businesses must actually be comparable. Industry, size, location, customer mix, growth, assets, lease terms and sale conditions can make superficially similar businesses very different.
Asset-based methods
An asset approach considers what the business owns and owes, including equipment, property, stock, intellectual property and liabilities. It may be particularly relevant where physical assets are material, but recorded book values do not always equal market values.
Return and future-earnings methods
Some approaches estimate value from maintainable earnings, expected return or future cash flow. The assumptions applied to risk and growth can materially change the result, so an unexplained online multiple is not an assessment.
Factors that can influence risk
Customer concentration, owner dependence, inconsistent records, short lease terms, disputed intellectual property, regulatory issues and declining earnings can affect an assessment. Recurring revenue, documented systems, diversified customers and capable management may reduce some risks when the evidence supports them.
Why sector knowledge matters
Different sectors rely on different economic drivers. Manufacturing may require analysis of equipment, capacity and customer concentration. Hospitality may turn on lease, licence, labour and location. Professional services may depend heavily on client transfer and owner relationships.
Use an estimate for planning, not as a promise
An indicative range can help you decide what to investigate next. It is not a formal valuation, sale-price guarantee or professional recommendation. Consider independent accounting, valuation, legal and tax advice appropriate to your circumstances.