What Is My Business Worth and How Do I Enhance the Value Before Speaking to Potential Suitors?

There has been no shortage of headlines recently around potential high-profile IPOs and eye-watering valuations, particularly in the US tech. market, with businesses such as SpaceX, OpenAI and Anthropic attracting valuations based heavily on future growth expectations, strategic positioning, investor appetite and, in some cases, a fair degree of market hype.

But for most UK owner-managed businesses, the reality is very different.

When it comes to an exit, sale or succession process, a buyer is usually looking at something far more grounded, i.e. sustainable earnings, quality of profit, customer strength and where there are contracts in place, systems, management capability, future growth potential and how dependent the business still is on the current owner.

In simple terms:- Your business is only worth what someone is willing to pay for it, on the day they buy it.

Traditional UK SME valuation rules of thumb can still be useful though. Many businesses are initially viewed through the lens of a multiple of EBITDA or net trading profit, often adjusted for assets, liabilities, risk and sector appetite. But the final value will depend on how attractive, transferable and low-risk the business looks to the right buyer.

So, rather than only asking, 

"What is my business worth?"

It may be better to ask and think about, 

"What can I do now to make the business more valuable, more transferable and more attractive before I go to market?"

I've pulled together a short practical (down-loadable) guide for owner-managed businesses setting out the key steps to think through before speaking to potential buyers or suitors. Which covers, from deciding what is actually for sale, preparing the right business information, reducing owner dependency, understanding valuation and tax, through to going to market, due diligence and completing the sale.

If selling, succession, partial exit or investment may be on your radar over the next few years, key is preparation, ideally before you start, and well before your first conversation with a potential buyer.

You can download the guide (pdf) below.

Peter Fleming

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