At a glance

• Calculating how much your business is worth is a key first step in getting the best possible price for it.
• Businesses that are particularly innovative, show great future potential or can demonstrate solidly repeatable profits are the ones most likely to be able to boost their value. It also helps if you’re prepared to stay on for a year or two as part of the handover.
• We can help you to understand how much you’ll need to earn from the sale to fund your future plans.

If you’re eyeing an exit from your business, you’re probably wondering what the best route is, and crucially, how much it might be worth.

Carefully calculating your firm’s potential value before speaking to buyers should help ensure you’re in the strongest negotiating position.

Here’s our advice on how to work out a sale value and the key impacting factors.

Choose your formula

The value of most small and medium-sized enterprises (SMEs) is calculated on a multiple of adjusted profit as measured by earnings before income tax, depreciation and amortisation, otherwise known as Ebitda (see below for an idea of what that multiple might be.)

Alternatively, you may base the value on your firm’s assets, such as plant, machinery and property. Companies generally only do this when their assets significantly outweigh their profitability – for example, if you’re in liquidation. But you could use it for a going concern if your business has many valuable physical assets but runs on tight margins.

You can also calculate what a business is worth based on revenue. This often applies to businesses such as technology start-ups, which tend to have extraordinary potential but no profits yet. Law and accountancy practices often use this formula too.

A potential buyer, when making an offer, should explain how they calculated it – but that won’t matter, of course, if you get the price you want.

How to adjust Ebitda

It’s worth having a good accountant who will be able to calculate your Ebitda from your financial data, then adjust for other factors affecting the value.

Adjustments can be made for any one-off events affecting profits, such as a large, extraordinary investment or writing off bad debt, for example.

The biggest adjustments may often be for limited-company owners who pay themselves with dividends. That’s because this won’t show up on the profit-and-loss statement.

If the business owner stays on as an employee post-sale, the dividends become salary payments. This could significantly affect profits. Adjustments for two or three well-paid directors can wipe out much of the Ebitda, so this is worth bearing in mind.

Boosting your multiple

For most small businesses, the Ebitda or revenue multiple will lie between three and five. However, multiples can increase beyond that – sometimes into double digits – for larger businesses, as they tend to be more resilient and better managed. Innovative firms with great potential, such as technology start-ups, can also attract larger multiples.

To boost your multiple, show buyers, if possible, that your profit is solid, robust, repeatable and guaranteed for several years. Revenue also needs to be diversified, which means reducing reliance on a small number of customers.

Environmental, social and governance (ESG) aspects are increasingly important too. Investors can often pull out of deals after ESG due-diligence findings, for example.

Bigger companies are increasingly under pressure from regulators, investors and customers to have robust ESG policies. Any buyer will want to understand your ESG strategy.

Be honest and credible about your willingness to continue working with the buyer over a reasonable transition period – 12 to 24 months is common. And, as part of that, you will need to be prepared to properly transfer all contracts, people, intellectual property and other key assets.

However well-run your business is, and your processes, buyers are likely to feel elements of value still sit in your knowledge and relationships. But it means that if you can’t commit to staying on, you could end up in more of a fire-sale situation.

But you won’t want to signal that you want to leave quickly. That can sometimes be a red flag and makes buyers wonder if you know something they don’t.

Another factor is the strategic importance of your company to the acquirer – strong potential to expand and monetise your business could support a higher price compared to the industry standard.

Creating competition among buyers

Attracting more than one potential buyer is essential. Competing bids are the only way to ensure you get the best possible price – so get as many as you can.

For many business owners, the first thought about exit comes when someone knocks on their door, asking to buy. But experts agree that if you only engage with one offer you’ll risk losing the best price. To attract more buyers, prepare your business for sale as soon as possible.

How we can help

You can ask us to help you calculate how much you need from the sale to fund your future goals.

It is important to look at your finances holistically and consider all potential options for funding your retirement or any other plans you may have.

For example, extracting more money from your business and paying it into your pension – while leaving enough cash reserves to cover emergencies, ongoing costs and so on – may reduce risk and pressure from the sale process.

Lifestyle planning – assessing in depth how you want your future to look – is equally crucial before you discuss any financial calculations. That starts with having someone who can ask you the right questions so you can understand what you really want.

We can then help you to model your cash flow to show exactly how much you need to fund your goals and aspirations.

And this modelling might mean you can accept an offer below previous expectations because you know it’s still enough for your needs and aspirations post-sale. Or you might realise you can sell earlier and have longer to enjoy the fruits of your labour. Conversely, you may decide that you need to spend some time growing the value of the business before you’d be able to exit with the sum you’re hoping for.

In addition to supporting all these planning goals, a financial adviser can act as a hub, introducing you to other professionals who can assist your business sale with advice on business planning, taxation, accountancy and legal structures.

We work in conjunction with an extensive network of external growth advisers and SME specialists, who have been carefully selected by St. James’s Place. The services provided by these specialists are separate and distinct to the services carried out by St. James’s Place and include advice on how to grow your business and prepare your business for exit and sale.

SJP Approved 09/07/2026