Business valuation is a general process of determining the economic value of either the whole, or part of, a business or company unit. Business valuation can be used to determine the fair value of a business for a variety of reasons and is typically undertaken by professional business valuers for an expert and objective assessment of the value of the business.
When valuing a business or company there are typically four main approaches applied by industry practitioners in the UK - earnings multiple; net asset value; discounted cash flow; and recognised industry rules of thumb.
In most cases for small trading businesses, an earnings multiple may provide the most accurate market comparison. To do this, initially, a fair level of maintainable earnings needs to be established from the surplus - an adjusted level of EBITDA (earnings before interest, tax, depreciation and amortisation). This level of sustainable earnings is then multiplied by a business category related multiple (service, retail, manufacturing and so on). All figures are then verified with a comparative value based on the open market transaction values of closely comparable businesses.
Net Asset Valuation
Another way to value a small business is through a net asset valuation. This method is often appropriate for strong, stable businesses with plenty of physical assets (property and manufacturing businesses are good examples). Asset valuation can result in the lowest assessment of a business and, for small trading businesses, a net asset approach may not represent fair value.
Discounted Cash Flow
Although more typically used for investment into larger organisations or significant asset acquisition, a discounted cash flow methodology can be appropriate for valuations in connection with growth shares and freezer shares - especially for established businesses with predictable cash flows, such as energy companies.
Industry Rules of Thumb
In some sectors – such as where there are high volumes of business acquisition and disposal - it can be appropriate to assess a business based on industry rules of thumb.
R A Valuation Services' extensive knowledge and competence means that we are able to value all types and sizes of business or company.
We are happy to explain the process and what you would need to provide, so why not phone the office on 01425 402 402.
R A Valuation Services Limited is the leading provider of business valuations in the UK.
Our valuers have multi-sector expertise, with experience in undertaking share and asset valuations for all industries and types of business - typically with a turnover of between £100,000 and £100 million per annum (though smaller and larger organisations can also be assessed). In addition, R A Valuation Services can value purely intangibles - such as software and IP.
R A Valuation Services Ltd prepares several hundred valuations every year. Valuations are bespoke with each report geared to the client's individual circumstances and requirements - all clients can be assured that every instruction receives the highest standard of proficiency, knowledge and courteous professionalism. The need for utmost confidentiality is recognised and clients are contacted strictly in accordance with their instructions. Details of a client's business are never disclosed or discussed with third parties.
R A Valuation Services Ltd prepares hundreds of valuations each year. Clients can be assured that each valuation instruction receives the highest standard of expertise, knowledge and courteous professionalism. Each assessment recognises specific factors such as the sector, trading relationships, the commercial environment, supply and demand and so on along with financial and return on investment criteria. The need for the utmost confidentiality is recognised and clients are contacted strictly in accordance with their instructions. Details of a client's business are never disclosed or discussed with third parties without the client's clear consent.
If you would like the basic fee structure or a specific quote, please contact us by email or telephone 01425 402 402. To proceed with a valuation, we will require copies of trading accounts for - ideally - the latest three financial years. Initially, please complete the Valuation Questionnaire Form (on the right). Please note that questions are generic to cater for all business sectors - intended as a starting point to clarify the context behind the enquiry - so complete where appropriate to the business to be appraised and we will request more details, specific to the business, upon receipt of the form.
Below is the Questionnaire Form in Word, PDF and Excel formats. Please complete and return by email (to email@example.com) together with accounts for the latest three years and, if applicable, recent management accounts. We aim to keep our questionnaire simple and quick to complete.