First, define the valuation question

“What is my business worth?” can mean the whole operating business, the equity in a company or a particular shareholding. Those are different subjects. A useful brief also specifies the valuation date and who will use the result.

An owner preparing for a sale and a shareholder considering a transfer may require different scopes. Establish the question before collecting multiples or choosing a spreadsheet template.

Three approaches you may encounter

Earnings and market comparisons

This approach considers an appropriate measure of earnings and relevant evidence about comparable businesses or transactions. Differences between the subject company and the evidence need to be assessed.

Discounted cash flow

A cash flow approach considers projected cash generation and the risk and timing of those cash flows. The result is sensitive to the forecast and other assumptions.

Asset-based analysis

An asset-based approach considers relevant assets and liabilities. Book values alone may not answer the valuation question, so the basis of assessment matters.

The approaches are not a menu where every business should choose the highest answer. A valuer considers suitability, evidence and whether another approach provides a useful cross-check.

Prepare information that explains the business

Recent accounts are a starting point, not the whole story. A trading update can explain changes since the reporting date. Forecasts, contracts, ownership documents and financing information may also be relevant.

  • Explain unusual income or costs with supporting evidence.
  • Distinguish recurring activity from expectations and one-off events.
  • Describe the owner’s role and any replacement responsibilities.
  • Identify customer concentration and significant commitments.
  • Keep the basis of financial figures consistent across documents.

If an important input is missing, flag it. Hiding uncertainty inside a confident-looking number does not improve the quality of the assessment.

Avoid mixing numbers that describe different things

A revenue multiple and an earnings multiple are not interchangeable. Nor is an enterprise value automatically the cash shareholders receive. When reviewing a calculation, ask what the inputs and output represent.

Read how EBITDA multiples work and enterprise versus equity value for examples of those distinctions.

The same care applies to comparing companies. A familiar industry label does not make two businesses identical in scale, risk, growth or financial structure.

Turn the question into a useful brief

For a young company, explore pre-revenue valuation. For a specific equity round, see fundraising valuations or EIS and SEIS valuation support.

Write down the purpose, subject, intended date and available information. Add any deadline and requirements supplied by other advisers. A provider can then discuss an appropriate scope and the limits of the work.

For a planned exit, see business valuations for sale. For budgeting the engagement, the valuation costs guide explains what a quote should clarify.