How to value a business, and what yours is worth

By Mo Romanowicz, founder of The Harvest Club. Published 10 October 2026. 5 minute read.

Most owners carry a number in their head. Often it came from a friend's sale, a broker's letter or a figure that would fund the next chapter. A buyer arrives at their number a different way, and the gap between the two is where many sales go wrong. This guide walks through the method buyers use, so that the first time you hear a price, it is one you already understood.

The short answer

For most UK owner-managed businesses, value is built in four steps:

1. Maintainable profit. What the business reliably earns, usually measured as EBITDA.
2. Adjustments. Costs and income that would not continue under a new owner, added back or taken off.
3. The multiple. A number that reflects how much risk a buyer sees in that profit continuing.
4. The walk to equity. Cash added, debt deducted, working capital squared up. What is left is what the shareholders receive, before tax and fees.

Profit times multiple gives the enterprise value, the headline price for the business as a going concern. The walk to equity gives the equity value, the part that reaches the owners.

Step 1: find the profit a buyer will believe

Buyers start from EBITDA: earnings before interest, tax, depreciation and amortisation. It strips out how the business happens to be financed and how its assets happen to be written down, so that two businesses can be compared on what their trading produces.

You will not find an EBITDA line in most UK accounts. You build it from operating profit by adding back depreciation and amortisation, which are usually in the notes rather than on the profit and loss account. Use your full statutory accounts, the set your accountant prepares for you to sign. The shorter version filed at Companies House often leaves the profit and loss account out entirely.

Buyers rarely take one year at face value. A weighted view of the last three years, giving most weight to the latest, is a common way to stop a single good year doing all the talking. A rising trend helps you. A falling one needs explaining before a buyer asks.

Step 2: adjust for what will not continue

Your accounts show the business as you run it. A buyer wants to see it as they would run it. That means adjusting for items such as owner pay above or below a market salary for a replacement, family members on the payroll who do not work in the business, one-off legal or restructuring costs, and personal costs that run through the company.

Every adjustment changes the value by the multiple, so it is where the most money is won and lost. It is also where buyers are most sceptical. Our guide to add-backs covers what buyers accept, what they reject and the evidence they expect.

Step 3: the multiple

The multiple is the buyer's view of risk, expressed as a number. A business whose profit will very likely continue earns a higher one. A business where profit depends on the owner, one customer or one good year earns a lower one.

Size matters a great deal. The Dealsuite M&A Monitor for August 2025 reported an average of 5.3 times EBITDA across UK and Irish deals, falling to around 3.1 times for businesses with £200,000 of profit. Smaller profits are seen as riskier, and fewer buyers compete for them.

Within any size band, the multiple moves with a handful of things a buyer can test: how recurring your revenue is, how spread your customers are, the growth trend, the direction of your margins, how defensible your position is, how much the business depends on you, and how credible your numbers are. Our guide to EBITDA multiples in the UK goes through each one.

Step 4: from enterprise value to what reaches you

Most UK deals are priced on a cash-free, debt-free basis. In plain terms:

• Cash in the business is added to the price, because the buyer is not paying for it twice.
• Debt is deducted: bank loans, overdrafts, hire purchase and finance leases, and usually loans owed to directors.
• Working capital is compared with a normal level. If you hand over less than the business normally needs to trade, the price comes down. If you hand over more, it can go up.

Then come the deal terms. Money paid at completion is worth more than money deferred, and money that depends on future performance, an earn-out, carries the risk that it is never paid at all. A higher headline price paid mostly later can be worth less than a lower one paid on the day. The valuation calculator compares two offers in today's money for exactly this reason.

Then tax

For many owners selling shares in their trading company, Business Asset Disposal Relief reduces the Capital Gains Tax on the first £1 million of qualifying gains over a lifetime. According to HMRC's helpsheet HS275, the rate was 10% until 5 April 2025, 14% for disposals from 6 April 2025, and 18% for disposals on or after 6 April 2026. Gains above the lifetime limit are taxed at normal Capital Gains Tax rates.

The conditions matter and are tested over the two years before the sale. For shares, these include holding at least 5% of the ordinary share capital and voting rights (with further economic tests) and being an officer or employee of a trading company. Take advice from a qualified tax adviser well before you sell, because some fixes take two years to count.

Other ways businesses are valued

• Asset-based: used where profit is low or the business is mainly its assets, such as property or equipment.
• Revenue multiples: used for recurring-revenue businesses that are investing for growth rather than taking profit.
• Discounted cash flow: forecasts future cash and discounts it back. More common for larger businesses with reliable forecasts.

For a profitable owner-managed business, expect a buyer to use profit and a multiple, and to sense-check it with the others.

What to do next

Work out your own number the way a buyer would, then find the two or three things that would move it most. The free valuation calculator takes about ten minutes, or less if you upload your accounts, and shows your two weakest value levers. The Harvest Score tells you how ready the business is to sell. The gap between the two is often bigger than owners expect, and much of it is within your control.

General information to help you prepare, not tax, legal or financial advice. Rates and rules change; check the current position and take advice on your own circumstances.