Value a business

According to the latest research, nearly half of entrepreneurs planning to sell their business are unaware of how much it is worth. The problem is particularly marked for the smallest businesses, with only 37% having a clear idea of the sale value of their assets.

Perhaps these figures should not be surprising. It could be said that valuing a business is as much an art as a science. There is no precise formula that applies to all businesses in all sectors, nor even to all businesses within a sector. Instead, an accurate valuation will depend on consideration of a number of factors. These include:

  • The size of the business - larger firms tend to be viewed as less risky and so attract a higher price, even if they are less efficient than smaller competitors
  • The prospects for future growth - buyers sometimes pay more for businesses with high growth rates because they repay the investment more quickly. You might consider selling before turnover and profits level out
  • Diversification - if you have a wide 'business mix' it can affect the sale price, since buyers may only be interested in one area or market
  • Customer base - the size of your customer base is important, but so is the quality of your customers and the cross-selling opportunities
  • Profitability - although generally the higher the profits, the higher the value, some buyers might prefer a business with areas in which large efficiency savings can be made
  • Cashflow and financial management - the size and certainty of cashflow, and the strength of the balance sheet and financial management are all vital factors.

While you will obviously not wish to undervalue your business, it is also important not to overvalue it. An inflated asking price will dissuade buyers, or make them think you are not serious about selling.

Ultimately, the value of your business will be determined by the laws of supply and demand. If there are plenty of willing buyers for your type of business and few sellers, you will get a good price, and if you can allow buyers to set a price through competitive bidding, so much the better.

While a business is only ever worth what a prospective buyer is prepared to pay for it, there are steps you can take to increase the value of your business, and ways to make a reasonable estimate of that value. Contact us to discuss your particular circumstances.

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SJD Accountancy are the UK's largest specialist provider of fixed fee, Limited company accountancy services to contractors; we've been acting for contractors across the UK since 1992 and have more than 15,000 clients.

We are the only national specialist firm of contractor accountants with offices nationwide. SJD Accountancy has more qualified staff than any other firm in our market with qualifications from the following major tax and accountancy bodies - ATT, AAT, CTA, ACCA, CA, ACA and FCCA.

  • Unlimited face to face meetings. This is a unique service only SJD Accountancy offers - unlimited face to face meetings across the UK - tax is complicated and sometimes only a meeting will do.
  • UK's Largest contractor accountants with more qualified staff. No call centres, no outsourcing, no automated call handling. Simply telephone, email or meet your own dedicated accountant face to face.
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  • Outstanding reputation. We have won more awards for customer service and accountancy excellence than any other firm in our market, including: Best Accountant for Contractors, Accountant of the Year and Best Professional Service Team to name just a few.
  • All inclusive low cost fixed fee accountancy package which includes completion of accounts*, payroll bureau, dividends and corporation tax computations, personal taxation, free bookkeeping software, your own dedicated accountant* and all company returns for a fixed fee starting from £120 plus VAT per month. Check our packages for more detail.

If you have any questions about contracting or would like any further advice please call our new client services helpdesk on 01442 275789 or email: janice@sjdaccountancy.com. Our new client services helpdesk is open Monday to Friday (8am to 6pm).

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*If you would like us to complete your company year end accounts we simply ask that you have been a client of SJD for one year or have made 12 monthly payments. All accountants are part or fully qualified.