Do Standard Valuation Tools Work?
When you’ve decided to sell a business, one of the first questions you’ll have is “How much is my business worth?”
Retirement, a new business venture, a change in lifestyle or priorities – whatever the reason for selling your company -– you’re probably eager to get the sale completed ASAP in order to move onto the next phase of your life or career. Feeling keen, many company owners head straight online and use online valuation tools in an effort to get a quick answer. Such systems, however, can interpret information about the value of your business too simplistically because they don’t take all the important elements of company performance into account.
An automated valuation system will typically look at financial details such as turnover and profit – seeing only the information on the balance sheet. That valuation will be indicative and typically based upon an EBITDA multiple. But there’s so much more to your business than the numbers, right?
A holistic approach to identifying the value of your business
It didn’t take you 5 minutes to build your successful company, so it would be unwise to rely on automated tools that claim to give you a business valuation “in just 5 minutes”. These ‘robots’ only speak the language of numbers – which are just one facet of what you have to offer to potential acquirers.
In contrast, when you work with corporate finance experts (humans!), they have the capacity to think beyond the balance sheet; evaluating the whole of your business – not just the financial factors.
Here are some of the aspects that they can include in your valuation to give you a holistic idea of what your business is truly worth…
Brand currency
Building a successful brand takes years, so imagine how much value it will add to your business if you can offer your buyer that ready-made profile, heritage and impeccable reputation? A brand which is a recognised market leader will help that buyer break into new markets, a ‘head start’ for them that you can ask serious money for.
Loyal client base
If you’ve developed a well-managed database of customer information, you’re sitting on a treasure chest. Add in a history of outstanding customer service, repeat business, amicable working relationships and clients who double as word-of-mouth ambassadors and you’re the keeper of the keys to that treasure chest. Valuation tools simply don’t pick up on such gems – and they may even be the jewels in your crown.
Recurring and contracted revenue
Established, contracted, recurring revenue streams are a sign that the business should be able to confidently forecast sustainable growth in the years to come. Yet again, this is a very attractive feature in the eyes of a buyer but its not something an online calculator would be able to fully comprehend and relay in the valuation results you’d receive from it.
Assets
- Patented inventions and products? ✅
- In-demand services? ✅
- A trustworthy and reliable management team? ✅
- Staff with specialist training? ✅
- Expensive and well-maintained equipment? ✅
- A strong supply chain? ✅
Your business may have already ticked all these boxes in the space of this paragraph, but an online business valuation tool might be blind to these assets because they can’t be measured solely in numerical terms.
Exit readiness
Even if you’ve got a strong brand, loyal and happy clients, as well as assets galore, smart acquirers could be put off by a lack of compliant and orderly documents such as contracts and leases. If you’re fastidious about keeping your paperwork in order, that could be more of a selling point (and price negotiation point) than you might think.
A corporate finance expert will not only be able to factor exit readiness into your business valuation, they’ll be able to help you tie up any pre-sale loose ends that could trip you up on the home stretch to selling your business for optimum value.
Get a business valuation with the human touch by reaching out to the friendly team of corporate finance experts at Entrepreneurs Hub. Contact us for a free, confidential, no-obligation consultation where we can help you value your business in a holistic way – one that will help you command a higher price – and assist you with the sale of your business so you can move onto your next chapter knowing that you sold it for its full worth.
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FAQs – Selling Your Company
How do I sell my business in the UK?
Selling a business in the UK typically involves preparing financial information, obtaining a valuation, identifying suitable buyers and negotiating the terms of a sale. Most owners work with an M&A adviser to manage the process confidentially, approach qualified buyers and maximise the value achieved.
At Entrepreneurs Hub, we talk about five key areas that make the difference between success and failure when selling your business. Read more…
What is my business worth?
A business is typically valued by applying a multiple to its sustainable profit, often EBITDA or adjusted net profit. The appropriate multiple depends on factors including growth, recurring revenue, customer concentration, management strength, owner dependency, market conditions and buyer demand.
Determining what your business is worth involves more than applying a simple formula. Use our Business Valuation Calculator to obtain an initial valuation range, or read our simple business valuation guide to understand the factors buyers consider.
How long does it take to sell a business?
Selling a business in the UK typically takes around 12 to 18 months from initial preparation to completion, although some transactions may be quicker or take longer. The timeline depends on business readiness, buyer demand, deal complexity, due diligence and how quickly the legal terms can be agreed.
Preparing accurate financial information and organising key documents in advance can help reduce avoidable delays. Read our complete business sale timeline to understand what happens at each stage.
When is the best time to sell a business?
The best time to sell a business is usually when it is performing strongly, its future growth is clear and you are not under pressure to complete a sale. Buyers are generally more attracted to businesses with rising or stable profits, reliable financial information and credible opportunities for further growth.
Business owners are often in a stronger position when:
- Revenue and profits are growing or consistently strong
- Financial records are accurate and up to date
- Future growth opportunities can be clearly demonstrated
- The business is not overly dependent on the owner
- There is a capable management team in place
- The owner has started preparing well in advance
Market conditions can also affect buyer appetite and valuation. Factors such as sector growth, access to finance and competition between buyers may support stronger deal activity, but preparation and business performance are usually more important than trying to identify a perfect month to sell.
Ultimately, the best time to sell is when both you and the business are ready, and the company can demonstrate sustainable performance and future value to potential buyers.
Use our Exit Readiness Tool to assess how prepared your business is, or read our guide on when to sell your business for further guidance.
Do I need an adviser to sell my business?
You are not legally required to use an adviser to sell your business, but many owners appoint an experienced M&A adviser to help manage the process. An adviser can prepare the business for sale, identify and approach suitable buyers confidentially, coordinate negotiations and support the transaction through due diligence.
The right adviser can also help create competitive tension, protect your time and reduce the risk of avoidable mistakes. Read our guide to choosing the right business sale adviser to understand the different types of support available.
How do I prepare my business for sale?
Preparing a business for sale involves strengthening its financial performance, reducing risk and making sure it can operate successfully without heavy reliance on the owner. Buyers will also expect accurate financial records, clear contracts, organised documentation and evidence of future growth.
Preparation should ideally begin well before approaching the market, giving you time to address weaknesses that could affect value or delay the transaction. Use our Exit Readiness Tool to assess how prepared your business currently is.
How is confidentiality protected during a sale?
Confidentiality is protected through controlled information sharing, anonymised buyer approaches and non-disclosure agreements. Potential buyers usually receive limited information at the start of the process and must sign an NDA before commercially sensitive details are released.
Prospective buyers should be assessed before receiving further information, with documents shared gradually according to their level of interest and credibility. A well-managed process also allows the business owner to retain oversight of who is approached and what information is disclosed.
What documents do I need to sell my business?
The documents needed to sell a business commonly include financial accounts, management information, forecasts, customer and supplier contracts, employment records, tax information and evidence of intellectual property ownership.
Buyers may also request details of property, insurance, legal disputes, regulatory matters and company ownership. Organising this information before due diligence begins can reduce delays and help maintain buyer confidence. Our Business Sale Due Diligence Checklist explains the main information buyers are likely to request.
What’s the quickest way to sell a company?
Selling a business quickly is possible, but speed shouldn’t come at the expense of value or deal security Read more…
What’s the best way to sell a business online?
Yes, you absolutely can sell a business online. Many platforms specialise in connecting business sellers with buyers. Read more…
How can I increase the value of my business before selling?
You may be able to increase the value of your business by improving sustainable profits, developing recurring revenue and reducing reliance on individual customers or the owner. Buyers also value capable management teams, reliable financial reporting, scalable operations and clear opportunities for future growth.
The earlier you identify the factors affecting value, the more time you have to make meaningful improvements. Use our Business Valuation Calculator for an initial indication of value and our Exit Readiness Tool to identify areas that may need attention.