How a buyer values your business

Most business valuations start from the same place: what the business earns once the owner is paid a market salary for the role. A buyer takes that figure, adjusts it, and multiplies it. Almost every conversation about price is a conversation about one of those three steps.

The starting figure is often called adjusted or normalised earnings. It strips out costs that are personal to you, one-off costs and anything that will not continue after the sale, and puts in a market rate for the work you do yourself.

Why two valuations can differ

Two buyers can read the same accounts and reach different figures. They may adjust the earnings differently, or apply a different multiple because they weigh the risks differently: a business that depends on you, a few customers who make up most of the sales, a lease with only a few years left to run.

A broker's valuation is a starting point for the conversation, not the price. The price is what a buyer agrees to pay, on terms you agree to accept.

The headline number is only half the deal. How and when it is paid matters as much.

Luke, at 28:40

What you can work on

Some of what a buyer weighs is in your hands in the years before a sale: accounts that are clean and up to date, contracts that can pass to a new owner, key staff on written agreements, a business that can run without you, and a lease with a sensible term left. Other things are not, such as the state of the market in the year you sell.

What we would do

We would start with the figure you need from the sale, not the figure you hope for, and work back from there. Then we would look at how the proceeds, your pensions and your other savings fit together, so the sale is one part of a plan rather than the whole of it.