How to value my business
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How to value my business
What's my business worth? How to value a small business or small company

Many business owners, at some point in time, ask themselves 'what is my business worth'? Almost all business owners will, at some point, need to establish the value of their business.

The worth of a business depends on how much profit a purchaser can make from it, balanced by the risks involved. Past profitability and asset values are only the starting points. It is often intangible factors, such as goodwill and intellectual property, which provide the most value.

Common Business Valuation Methods

Earnings Multiples:
Quite often, multiples of earnings are used as a business valuation method. This method would be suitable for businesses or companies with an established financial history.

The Price/Earnings (P/E) Ratio represents the value of the company divided by its post tax profits. The equation can be relatively straightforward to calculate, however there is no standard P/E ratio figure that can be used to value every business. Companies within certain industries, such as high tech and IT, may command a much higher P/E ratio than more traditional bricks and mortar establishments.

Businesses where profits are growing rapidly will also command a higher earnings multiple, than firms where profit growth is low.

Although many valuers may use the P/E ratios in the financial press when valuing a small business, in the experience of R A Valuation Services Limited, appropraite earning multiples to represent realistic market values for (small) private companies are not determined by FTSE-100 sized multiples, even with a discount applied.

Industry Specific Valuations:
In certain industries, when businesses change hands on a regular basis, industry-wide rules of thumb are sometimes used to value a business. R A Valuation Services Limited has considerable experience and information on insudtry related methodologies.

Asset Valuation:
This method is more appropriate for companies with a high level of tangible assets, such as property and other 'asset-rich' companies. The valuation is made by calculating the net realisable value of all assets.

Discounted Cashflow:
This method uses an estimate of the business' cashflow over a certain period of time. The 'terminal value' of the company is also calculated after this period has expired. The value of the predicted cashflow, plus terminal value, is then discounted, to provide a current business valuation.

It may be hard to establish an accurate terminal value, as it relies so heavily on the cashflow estimates. This valuation method may be used when a company is deemed as potentially having considerable potential though few assets and limited financial history.

Essentially, the value of your business is the amount that a willing buyer is prepared to pay for it on the open market. Perhaps uniquely, R A Valuation Services Limited holds and updates a database of previously achieved open market sale prices to verify and justify any approach to valuation taken.

We specialise in providing assistance in How to value my business in the UK and Europe for the purpose of business sale and purchase, partnership or shareholder change, litigation, matrimonial and legal separation, incorporation, tax settlements, borrowings and business development.

Why not give us a call on 01425 402402 to talk through your requirement. You can also make an email enquiry by clicking here.

Generic Business Valuations
Can RA value any type of Business?
The valuation process can be applied to all types of small business provided that the business has a suitable trading history .... more >>

How does RA value a Business?
The valuation process is concerned, primarily, with an assessment of a justifiable value for goodwill .... more >>

What is RA Valuation Services Ltd?
Established in 1991, the focus was originally on opticians and goldsmiths .... more >>

Reasons for a valuation
A Business Valuation supported by a professionally prepared valuation report from an independent and authoritative source is an essential aid to:
  • Management or internal buyout
  • Business sale / Business purchase
  • Partnership and shareholder change
  • Litigation e.g. legal separation
  • Incorporation
  • Tax agreement
  • Borrowing and funding
  • Business development
  • Benchmark / Performance indicators for business
  • Report is definitive & realistic in the market place
RA Valuation Services Ltd
Recognised Authority
Valuation reports produced by RA Valuation Services Limited are acknowledged to be the authoritative form of business valuation for many small and micro business sectors and are accepted by:
  • HMRC
  • Bank managers
  • Other lenders & providers of finance
  • Accountants
  • Tax specialists
And an RA Valuation Services' valuation report is tailor-made for their purposes. Indeed, such is their authority that an RA Valuation Services' valuation report is normally insisted upon in support of negotiations.

The report itself is detailed and informative, professionally presented and smartly bound.

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