How Much Can I Sell My Business For?
Determining it’s value is more than just calculating a number…
How much you can sell your business for will depend on its profitability, growth prospects, sector, customer base, management team, risk profile and the level of buyer demand. Many business valuations start with adjusted EBITDA and an appropriate valuation multiple, but the eventual sale price can be higher or lower depending on how attractive the business is to potential acquirers.
A commonly used starting point is:
Adjusted EBITDA × Valuation Multiple = Enterprise Value
For example, if your adjusted EBITDA is £2 million:
- £2m × 4 = £8m
- £2m × 5 = £10m
- £2m × 6 = £12m
On that basis, you might initially estimate an enterprise value of between £8 million and £12 million.
But that does not necessarily mean your business can be sold for somewhere within that range.
Why the multiple matters
One of the biggest questions is whether a multiple of 4x, 5x or 6x is appropriate for your particular business.
Buyers will consider factors such as:
- the quality and sustainability of your earnings
- historic and forecast growth
- recurring or contracted revenue
- customer concentration
- strength of the management team
- reliance on the owner
- market position and competitive advantage
- sector-specific buyer appetite
- strategic opportunities or synergies available to an acquirer
Two businesses generating the same EBITDA can therefore attract very different valuations.
Our guide How to Value a Business explores how valuation multiples and other valuation methods are applied in more detail.
Is adjusted EBITDA always straightforward?
Not necessarily.
Adjusted EBITDA aims to show the underlying maintainable profitability of the business by taking account of legitimate one-off, exceptional or owner-related costs.
However, buyers will scrutinise those adjustments carefully. They may not accept every adjustment proposed by a seller, so understanding what represents genuinely maintainable earnings is an important part of establishing a realistic valuation.
The period being valued matters too. Depending on the business and circumstances, buyers may look at historic results, current trading and forecasts rather than relying on a single year’s EBITDA.
Enterprise value is not necessarily what you receive
It is also important to distinguish between enterprise value and the amount ultimately attributable to shareholders.
Enterprise value is the value of the underlying trading business. The eventual equity value may then be affected by factors such as debt, surplus cash and the agreed level of working capital at completion.
There may also be fees and tax to consider when determining the amount you ultimately realise personally from a transaction.
So, what is your business really worth?
A valuation provides an important benchmark, but it should not be confused with a guaranteed sale price.
Ultimately, the strongest evidence of what a business is worth comes from taking a well-prepared business to an appropriately selected group of credible buyers and understanding what they are prepared to pay.
A strategic buyer may sometimes attribute additional value to an acquisition because it gives them access to new customers, capabilities, technology, geographical markets or other commercial synergies. Competitive buyer interest can also influence the final outcome.
For further insight, read How Much Is My Business Worth? A Simple Valuation Guide for Sellers.
If you want an initial indication of your current value, try our Business Valuation Calculator. It provides a guide valuation range based on some of the key financial information buyers consider and is designed as a useful starting point rather than a guaranteed sale price.
For a more detailed explanation of valuation methodology, download our How to Value a Business guide.