What is my business worth? How buyers value a UK company
How buyers value UK private companies: adjusted earnings, multiples, what drives them up or down, and what you actually receive.
Update: the Budget on 28 October 2026 confirmed this limit will fall to £500,000 for disposals on or after 6 April 2027. Read our Budget breakdown.
Most owners have a number in their head. Buyers have a method. Understanding the gap between the two is the first step to a better exit.
The short answer
Most profitable UK businesses are valued the same way: adjusted earnings × a multiple. Earnings show what the business makes in a normal year. The multiple reflects how confident a buyer is that it will keep making it, and grow, once you’ve gone.
That sounds simple, and it is. The skill, and most of the negotiation, sits in two questions: which earnings figure, and which multiple?
Step one: what buyers mean by “earnings”
Buyers rarely use the profit figure in your accounts. Most work from EBITDA: earnings before interest, tax, depreciation and amortisation. Stripping out financing and accounting choices makes businesses easier to compare.
They then adjust it to show what a new owner would actually earn. Common adjustments include:
- Owner pay. If you pay yourself a small salary topped up with dividends, a buyer will deduct the market cost of replacing you. If you pay yourself well above market rate, the excess can be added back.
- One-off costs. A legal dispute, an office move or a bad debt that won’t recur can usually be added back, if you can evidence it.
- Personal costs. Family members on the payroll who don’t work in the business, or personal expenses run through the company.
- Rent. If you own the premises and charge the business little or no rent, a buyer will assume a market rent going forward.
The result is often called normalised or adjusted EBITDA, and every pound of it matters: at a multiple of five, an extra £20,000 of credible adjusted earnings adds £100,000 to the price. So does every pound a buyer takes off.
For very small businesses, where the buyer will step straight into the owner’s job, advisers sometimes use seller’s discretionary earnings instead, which counts the owner’s pay and benefits as part of the profit. The multiples applied to it are lower to compensate.
Step two: the multiple
The multiple is the buyer’s view of risk and opportunity, compressed into one number. Size is usually the biggest single driver: larger businesses attract more buyers, find borrowing easier and are seen as more stable, so they command higher multiples. Beyond size, buyers look at:
| Pushes the multiple up | Pushes the multiple down |
|---|---|
| Recurring or contracted revenue | One-off, project-by-project income |
| A management team that runs the business day to day | Everything depends on the owner |
| A broad spread of customers | One or two customers make up most of sales |
| Steady growth, with evidence it will continue | Flat or falling sales |
| Clean, timely, well-explained accounts | Late, messy or unexplained numbers |
| A growing sector buyers want to be in | A sector facing structural decline |
| Documented systems and processes | Know-how held in a few people’s heads |
Two businesses with identical profits can sell for very different prices because they sit at opposite ends of this table.
Where the benchmark numbers come from
Advisers ground the multiple in real transactions: what buyers have actually paid for comparable businesses. Several published sources track this for UK private companies, including BDO’s Private Company Price Index, which tracks the multiples paid by trade and private equity buyers, and the UK200Group SME Valuation Index, which reports median multiples from deals involving smaller UK businesses.
Treat headline figures with care. Indices dominated by larger transactions will show multiples well above what most owner-run businesses achieve, because size has such a strong effect. A sector average also hides a wide range: the best businesses in a sector can sell for twice the multiple of the weakest. Use benchmarks as a starting point for a conversation, not a price.
From headline price to money in your account
The figure a buyer quotes is usually the enterprise value: the value of the business itself, before adjustments. What you receive can be quite different:
- Cash and debt. Most deals are done on a “cash-free, debt-free” basis. Surplus cash in the business is generally added to the price; borrowings are deducted.
- Working capital. Buyers expect a normal level of working capital (stock, debtors minus creditors) to be left in the business. If it’s below that level at completion, the price comes down.
- Deal structure. Not all of the price is usually paid on day one. Part may be deferred, paid in instalments, or linked to future performance through an earn-out. A higher headline price with a large earn-out can be worth less than a lower, cleaner offer.
- Tax. Qualifying owners may be able to claim Business Asset Disposal Relief, which reduces the rate of capital gains tax on up to £1 million of lifetime gains. At the time of writing, the relief rate is 18% for disposals from 6 April 2026. The rules and conditions matter, so take tax advice early, not after you’ve agreed terms.
Why different buyers give different numbers
The same business can be worth different amounts to different buyers:
- Trade buyers, often competitors or companies in a related market, may pay more if they can save costs or cross-sell to your customers.
- Investor-backed buyers, including private equity, focus on growth and returns, and are more likely to want management to stay on and to use earn-outs or rollover equity.
- Management buyouts are usually constrained by how much the team can borrow, so prices are often lower and more of the money is deferred.
- Employee ownership trusts are typically funded from the business’s future profits, so the price is paid over several years.
Choosing the right type of buyer can matter as much as negotiating the right price.
Five things to do now
Value is built years before a sale, not in the final negotiation. Wherever you are on the road to an exit, these steps will help:
- Work out your adjusted EBITDA. Go through the last three years with your accountant and list every add-back you could evidence. It tells you where you stand, and stops a buyer defining it for you.
- Reduce your own importance. Every key relationship, decision and process that runs through you lowers the multiple. Start handing them over now.
- Spread your customers. If one customer accounts for more than a fifth of sales, a buyer will price that risk in. Winning a few new mid-sized accounts can lift the value of everything else.
- Get your numbers in order. Timely monthly management accounts, clean year-end accounts and a clear explanation for anything unusual build buyer confidence quickly.
- Get an independent view. A valuation from a corporate finance adviser or accountant, done well before you plan to sell, gives you a realistic range and time to improve it.
The gap between what an owner hopes for and what a buyer will pay is usually explained by the factors in this article. The good news is that most of them are within your control, given enough time.
Exit Index provides general information, not financial, legal or tax advice. Speak to a qualified adviser about your own circumstances.