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How to Value a Company

Whatever the reason or requirement for a valuation, it is essential to accurately assess the value of a private limited company – for example a seller will be clear about the value they can expect to get from a buyer. If the company is looking for investment, an investor will look positively on the business if the directors have provided an accurate valuation.

There are a number of factors that can affect the value of an unlisted company:

  • Finance – trading performance
  • State of the sector and economy at large
  • Competitors – how much are competitors (of a similar size) worth
  • Intellectual property and patents
  • Strength of relationships with customers
  • Value of assets and debt
  • Regularity of purchases / orders
  • Owner or key man dependencies
  • Reputation and brand name

Ultimately, the biggest single factor that will affect the value will be how much a buyer is prepared to pay. Perhaps uniquely, R A Valuation Services Limited holds and updates a huge database of previously achieved open market sale prices, across an expansive selection of business sectors, to verify and justify the valuation.

Methods of valuation

There are a number of methods that can be used to value a private limited company:

Multiple of profits

Applies an average or weighted average annual profits – including adjustments to any one-off factors like exceptional costs – multiplied by an appropriate earnings multiple relevant to the industry’s sub-sector, or to the specific business.

Net Asset Valuation

Another way to value a company is through a net asset valuation. This method is often appropriate for asset rich companies with plenty of physical assets (such as property and manufacturing companies). Asset valuation can result in the lowest assessment of a company and, for a profitable trading unlisted limited company, 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 companies with predictable cash flows.

To establish the value of a private limited company through discounted cash flow, the valuer will estimate today’s value of future cash flows. The assessment considers risk and the time value of cash. In short, time value is based around today’s pound having more value than tomorrow’s, owing to its earning potential.

We are happy to explain the process and what you would need to provide, so why not phone the office on 01425 402 402.


How to Value a Company


An expert business valuation supported by a professionally prepared Valuation Report from an independent and authoritative source is an essential aid for:

  • Acquisition and divestment negotiations
  • Management buy-out and management buy-in
  • Business sale and business purchase
  • Director, shareholder, partner change
  • Restructuring
  • Matrimonial / divorce settlements
  • Dispute resolution
  • Litigation
  • Tax planning (e.g. EMI schemes), tax agreements and tax disputes
  • Incorporation
  • Borrowing and funding
  • Business development
  • Strategic planning
  • Performance benchmarking and indicators
How to Value a Company


Valuation Reports produced by R A Valuation Services Ltd are bespoke and geared to each client’s individual circumstances and requirements; they are definitive and realistic in the market place. As we are recognised as expert witnesses for supplying Valuation Reports to UK courts and HMRC queries/challenges, we are acknowledged to be the authoritative business valuer by:

  • HMRC including:
  • Shares and Assets Valuations (SAV)
  • Valuation Office Agency (VOA)
  • UK Courts
  • Banks
  • Other lenders and financial intermediaries
  • Tax specialists
  • Accountants

R A Valuation Services' Valuation Reports are tailor-made for their purposes, definitive and realistic in the market place. Indeed, such is their authority that an R A Valuation Services' Valuation Report is normally insisted upon in support of negotiations.