To value your business, work out the profit a buyer can reasonably expect to keep earning and prove it from your own records. Then apply a method that suits how the business makes money, which gives you a range a buyer can test, not a single price. This guide shows how to value your business in six steps, with one worked example. It is written for owner-managers selling for the first time, and for the accountants and solicitors who advise them.
How to value your business at a glance
You can value your business in six steps, then check what the deal structure and tax leave you with.
- Gather the records a buyer will check.
- Work out maintainable profit from three years of accounts.
- Choose a method, usually an earnings multiple for a profitable business.
- Apply it, adjust for risk and test the range against completed sales.
- Check how structure and tax change what you keep.
What “value” means when you sell a business
When you sell, your business is worth what a willing buyer agrees to pay for the profit it can reasonably be expected to earn. The law defines market value for tax, but no official price list exists for small businesses.
For Capital Gains Tax, the Taxation of Chargeable Gains Act 1992, section 272 defines market value as the price an asset could reasonably achieve on the open market. HMRC’s Capital Gains Manual at CG59540 applies this to unquoted shares as the price agreed between a hypothetical willing seller and willing buyer. Its Shares and Assets Valuation team values such shares for tax, following the Shares and Assets Valuation Manual.
That test does not set the price of an ordinary sale. Under section 17 of the same Act, market value replaces the actual price where a deal is not a genuine arm’s length bargain, such as a gift.
In a real sale, the buyer brings their own funding and view of risk. No official series records what owner-managed businesses sell for or at what multiple, as our UK Business Valuation Market 2026 report explains. That holds across the 5.7 million private sector businesses the Department for Business and Trade’s Business population estimates 2025 counted in the UK at the start of 2025. So if your question is how to value my business, start with what a buyer can prove it earns.
Step 1: Gather the records a buyer will check
Start with the evidence, because a buyer values your business on what your records prove, not on what you tell them. Gather three years of accounts and the documents behind them before you settle on any figure.
| Record | What a buyer uses it for |
|---|---|
| Three years of accounts | The profit trend and the base for maintainable profit |
| Current management accounts | Whether trading has held up since the last year end |
| VAT returns and bank statements | That reported sales match money received |
| Payroll and staff contracts | True staff costs and who transfers with the business |
| Lease, licences and permits | Whether trading can continue in the same place and way |
| Main customer and supplier contracts | How secure the income and margins are |
During due diligence, the buyer’s accountant will test these records in detail. Any figure you cannot evidence is likely to be removed from the profit they pay for. Missing management accounts and add-backs without paperwork are the gaps most likely to slow a sale or lower an offer.
Step 2: Work out your maintainable profit
Maintainable profit is the profit a new owner can expect to keep earning once the business runs on normal commercial terms. You reach it by adjusting the net profit in your accounts for costs that will change after the sale, and each adjustment needs a document behind it.
Owner’s pay and add-backs
A buyer replaces what you pay yourself with the market cost of someone doing your role. If you take a small salary and the rest as dividends, your reported profit may look higher than a buyer will accept.
Interest on loans repaid at completion is a common add-back, since a buyer will not take on that debt. Add back depreciation only if you also deduct a realistic allowance for replacing equipment.
One-off and personal costs
Remove costs that will not happen again, such as a legal dispute, a rebrand or a major repair. Remove personal costs that run through the business too, such as a private car or a relative on the payroll who does not work there. Buyers most often question a salary set below the cost of a manager, costs called one-off that recur, and personal spending with no clear record. If an add-back cannot survive that question, leave it out.
The trend across three years
A buyer looks at the direction of profit as well as its level. Steady growth supports using the latest year as the base, while falling profit pulls the figure toward the lower years. If one year was distorted, explain why with evidence, because an unexplained dip reads as risk.
Step 3: Choose the method that fits your business
The right method depends on where your value comes from: steady profit, tangible assets or predictable future cash. For a profitable owner-managed business, an earnings multiple is usually the starting point, with the other methods used as checks.
Earnings multiple
An earnings multiple values the business as maintainable profit multiplied by a figure that reflects risk. A higher multiple means a buyer trusts the profit to continue. Our overview of business valuation methods compares this approach with the others.
Asset-based valuation
An asset-based valuation starts from net assets on the balance sheet, restated at current values. It suits businesses whose value sits mainly in property, equipment or stock; for a profitable trading business it usually marks a lower limit. Our guide to asset-based valuation explains how assets are restated.
Comparable transactions
This method values a business by the prices paid for similar ones. Small business sale prices are not published officially, so reliable comparisons usually come from a broker’s records of completed deals, as our guide to comparable transactions valuation explains.
Discounted cash flow
A discounted cash flow valuation forecasts future cash and converts it to a value today at a rate that reflects risk. It suits businesses with long contracts, but small changes to the assumptions move the answer a long way. Our guide to discounted cash flow valuation sets out when it is worth the extra work.
Step 4: Apply it to a worked example
Here is one fictional business, valued as a range rather than a single price. Every figure below is invented for illustration and is not a market statistic.
The business is an owner-run cafe in a market town, trading as a limited company from a leased shop. Reported net profit before tax rose from £38,000 to £42,000 to £46,000 over three years, so the latest year is a fair base.
| Line | Amount | Reason |
|---|---|---|
| Reported net profit before tax, latest year | £46,000 | From the filed accounts |
| Add back: owner’s salary | £12,000 | Replaced by the market cost of the role, below |
| Deduct: market cost of a full-time manager | -£30,000 | What a buyer would pay someone to run the cafe |
| Add back: loan interest | £3,000 | The loan is repaid at completion |
| Add back: roof repair | £6,000 | A one-off cost, supported by an invoice |
| Add back: owner’s private car costs | £4,000 | A personal cost run through the business |
| Maintainable profit | £41,000 | The total of the lines above |
| Multiple applied | 2 to 3 times, assumed for illustration only | An invented range for this example; a real multiple depends on the factors in Step 5 |
| Indicative value range | £82,000 to £123,000 | £41,000 x 2 and £41,000 x 3 |
The range is only as strong as the evidence for each line. If the roof invoice is missing, a buyer is likely to remove the £6,000, and at the same assumed multiples the range falls by £12,000 to £18,000. The multiple is where judgement enters, so it should come from completed sales of comparable businesses, not a figure heard in conversation.
Step 5: Adjust for what makes buyers pay more or less
The same profit can support a higher or lower price, depending on how much risk a buyer takes on. These factors usually move the multiple or the deal terms, rather than the profit itself.
| Factor | A buyer usually pays more when | A buyer usually pays less when |
|---|---|---|
| Owner dependence | Staff run daily trading | Customers and suppliers depend on you |
| Lease length | Years remain and it can be assigned | It is short or hard to assign |
| Customer concentration | Income is spread widely | One or two customers dominate sales |
| Staff | A settled team works on documented contracts | Key people may leave |
| Compliance | Licences and certificates are current | Gaps need fixing after completion |
| Sector risk | Demand in the sector is stable | Insolvencies are rising or demand is falling |
| Cost of borrowing | Finance is cheaper | Higher rates limit what borrowers can pay |
Owner dependence needs particular care: where profit relies on you, buyers tend to offer less up front, ask for a longer handover or tie part of the price to future results. A team that can run the business without you improves both price and terms.
Buyers and lenders also check official data on your sector. The Insolvency Service’s Company insolvency statistics, September 2026 recorded 1,882 company insolvencies in England and Wales that month, with tables by industry. The Office for National Statistics’ Business demography 2024 gives UK business survival rates by sector, with the 2025 edition due on 19 November 2026.
Where a buyer funds part of the price with debt, the cost of that debt limits their offer. The British Business Bank’s Small Business Finance Markets Report 2026 found that gross bank lending to UK smaller businesses rose 9% to £68 billion in 2025. The Bank of England’s Monetary Policy Summary, September 2026 held Bank Rate at 3.75%, and its Interest rates and Bank Rate page shows any later change.
Step 6: Test your figure against the real market
A valuation is only proven when buyers make offers, so test your range against what similar businesses have actually sold for. Because no official data exists, that evidence comes from completed deals, not published averages.
Ask whoever values your business which comparable sales support the range and on what terms. A multiple with no completed sales behind it is an opinion, not evidence. A good broker can explain why each comparable deal is relevant and how your business differs from it.
Look at terms as well as price. Part may be paid later or depend on results, so two equal offers can leave you with different amounts.
Share sale or asset sale: why the structure changes the number
The structure decides what the buyer is buying, so it changes the price, the risk each side carries and what you keep. In a share sale the buyer buys your company with its history; in an asset sale the buyer buys chosen assets and the trade.
In a share sale, the buyer inherits past liabilities, so expect detailed warranties and careful due diligence. In an asset sale, liabilities can stay behind, but each asset, contract and lease must be transferred separately.
Two rules often shape the choice. A sale of assets can fall outside the scope of VAT if it meets the conditions for a transfer of a going concern in HMRC’s VAT Notice 700/9. The Acas guide to handling a TUPE transfer says TUPE usually applies when a business and its main assets move to a new employer. It is not likely to apply to a transfer of shares only.
How tax affects what you keep
Tax does not change what your business is worth to a buyer, but it changes how much of the price you keep. If you sell as an individual, Capital Gains Tax and Business Asset Disposal Relief are the main rules to check.
HMRC’s Capital Gains Tax rates and allowances guidance sets rates of 18% and 24% for individuals in the 2026 to 27 tax year, depending on other taxable income. The annual exempt amount is £3,000. GOV.UK’s guide to Business Asset Disposal Relief gives 18% on qualifying gains from 6 April 2026, up to a £1 million lifetime limit. HMRC’s helpsheet HS275 Business Asset Disposal Relief (2026) sets out who qualifies.
HMRC’s Capital Gains Tax: new Business Asset Disposal Relief lifetime limit, published on 29 October 2026, confirms the limit falls to £500,000 for disposals on or after 6 April 2027. If your gain could exceed £500,000, your completion date may matter.
If your company sells its assets, the tax position is different, because the company makes the sale. Ask your accountant to compare the tax on each structure before you agree the main terms.
A DIY estimate or a professional valuation: when you need each
A DIY estimate is enough to decide whether selling is worth exploring; a professional valuation is worth having before you set a price or speak to buyers. The difference is evidence, because a professional can test your range against completed sales you cannot see.
Use your own estimate to check expectations and spot weaknesses worth fixing. Get a professional business valuation when the figure will be used to market the business or negotiate. If the value is needed for tax, divorce or a shareholder dispute, ask your accountant or solicitor whether a formal valuation is required.
What to do next
Start by gathering three years of accounts and listing every adjustment with its evidence. Then have your range checked against completed sales before you set a price or approach anyone.
Fixing owner dependence or renewing a lease can take months, so the earlier you value the business, the more options you have. Keep the process discreet, because early news can unsettle staff and customers. Our guide to protecting sensitive information in a confidential sale explains how to share figures safely.
Frequently asked questions
Short answers on valuing a small business and business valuation in the UK.
How much is a small business worth in the UK?
There is no official figure, because no UK government body publishes what owner-managed businesses sell for. The answer depends on your maintainable profit, the risks a buyer sees and what comparable businesses have achieved. Ask for your range to be tested against completed sales of similar businesses.
Is there a standard multiple for valuing a business?
No. A multiple reflects how far a particular buyer trusts your profit to continue, so it varies with owner dependence, lease length, sector and the cost of borrowing. Multiples quoted online are not official data. Ask for the completed sales behind any multiple you are given.
Can I value my business on turnover?
Not reliably on its own. Buyers pay for profit they can keep, and two businesses with the same turnover can earn very different profits. Maintainable profit, backed by evidence, drives any serious offer, so use turnover only as a rough cross-check.
Does HMRC value my business when I sell it?
Not usually. When you sell to an independent buyer in a genuine arm’s length deal, Capital Gains Tax is normally worked out on the price you receive. Market value rules apply in other cases, such as gifts, when HMRC’s Shares and Assets Valuation team may value unquoted shares. Your accountant can confirm which applies.
Should I get a valuation before I decide to sell?
Yes, if you are seriously considering a sale. A valuation shows whether the likely range meets your needs and which weaknesses, such as owner dependence or a short lease, are worth fixing first. It also helps you plan around tax dates, including the announced Business Asset Disposal Relief change from 6 April 2027.
If you would like your range checked against completed sales, ask Blacks Business Brokers, part of Business Transfer Group, for a free business valuation. We will explain the reasoning behind any range we give.
This guide is general information, not a formal valuation or financial, legal or tax advice. Speak to your accountant or solicitor before making decisions.
Author – John P. Gaskell
John is a senior member of the Blacks Brokers team with extensive experience leading successful national sales operations. He plays a central role in developing the team’s approach to client service, drawing on a deep belief that positivity, care and drive are the defining qualities of any great salesperson. John delivers comprehensive training across the organisation that instils a client-first ethos at every level, ensuring consistency of service throughout every transaction. His focus is always on achieving the best possible outcome for each client the business serves.