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Company Valuation Methods

How to value a business

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How to value a business - Company valuation methods

What methods are used to value a business?

 

Common methods of valuing a business include:

  • A multiple of EBITDA

  • A multiple of the business annual turnover

  • A multiple of the net profits

  • A valuation based on the balance sheet

  • Discounted cash flow

 

The important thing to note is that the above methods give only a general indication of value. A professional business sale advisor will be able to give you a much better understanding of what methods and multiples should be used to accurately value a business for sale.

What method should be used?

  • Profit is the single most important factor of business valuation as such most business brokers use a multiple of EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) to provide an indication of value.

 

What multiple should you apply to a business valuation?

Typically multiples of non-listed, middle market and SME businesses range from one up to ten times. The average multiple for smaller SMEs is 3-5x Adjusted EBITDA.

 

There are many aspects of a company that will positively affect valuation including e.g. Historic and future forecasted growth, a strong position in a niche market place, contracted customer relationships.

Factors that can negatively affect business valuation include over reliance on a single or small group of customers or suppliers, risks to the supply chain, a weak management team and high staff turnover to name just a few.

How much does a valuation cost?

Hyde House will provide an assessment of your business value free of charge for businesses with a turnover of £1m and greater.

Our advisers will use their knowledge and experience of the M&A market place to provide a realistic indication of value and help you to understand the driving factors of your valuation.

If we do not think we can meet your value expectations we will candidly inform you that we are not confident that your desired valuation can be achieved.

 

We will explain our methodology and offer advice on preparing your business for sale.

Request a free valuation performed by a business sale expert.


Business valuations for purposes other than a potential sale

If you need a valuation for reasons other than a business sale please contact us.

 

We can provide a full business valuation report for an agreed fee. Our starting price for a simple business valuation is £500 +VAT

Valuation Reports are quoted on a case by case basis. For more complex valuation reports

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