22nd September 2026
Selling a business is one of the most significant decisions a business owner will ever make. It often represents years of dedication, investment, and hard work, making it natural to have expectations about what the business is worth. Yet once the sale process begins, understanding how that value is assessed can quickly become complex.
Business valuations involve far more than turnover or profit alone. Factors such as future earning potential, market conditions, assets, contractual arrangements, and commercial risk can all influence what a buyer is prepared to pay. Without a clear understanding of these considerations, navigating a sale can feel uncertain and sometimes overwhelming.
A realistic valuation can provide valuable clarity before taking your business to market, helping you prepare for negotiations, due diligence, and potential challenges ahead. Jen Goodwin, Director & Head of Corporate at Myers & Co, explains the key factors that influence business valuations and what business owners should know before selling.
There is rarely one fixed answer to what a business is worth.
A valuation is usually an informed assessment based on:
A helpful starting point is to understand the difference between value and price.
Value is an estimate of what the business may be worth using a recognised approach.
Price is what a buyer is actually prepared to pay.
The two can be different. A profitable business may attract a lower offer if it relies heavily on one customer, one supplier, or one key individual. Equally, a business with modest profits may be attractive if it has strong recurring income, valuable intellectual property or clear growth potential.
This is why professional valuation advice from an accountant, corporate finance adviser or valuation specialist is often so important before a sale. Valuation is only one part of the picture, and seeking legal advice early can also help identify issues that may affect value, buyer confidence or the structure of the transaction.
There is no single valuation method that applies to every business. Most SME valuations will use one or more recognised approaches.
Earnings-based valuation
This is often used for profitable trading businesses. It focuses on maintainable or normalised earnings, commonly using EBITDA (earnings before interest, tax, depreciation and amortisation), with appropriate adjustments for one-off items, owner remuneration and other non-recurring income or costs before applying a sector-specific multiple.
Asset-based valuation
This approach looks at the value of business assets, such as property, machinery, equipment and stock. It is often more relevant where a significant proportion of value sits in tangible assets, and may be less suitable for profitable service-based businesses where value is driven mainly by goodwill, contracts, customer relationships or recurring income.
Discounted cash flow valuation
A discounted cash flow (DCF) valuation assesses expected future cash flows and discounts them to reflect risk and the time value of money. It is usually most useful where future cash flows can be forecast with reasonable confidence.
Market-based valuation
This considers prices achieved in comparable business sales, although direct comparisons can be difficult because every business is unique.
Regardless of the methodology used, buyers will want evidence to support the figures presented.
Business owners often see the years of effort invested in building their company. Buyers tend to look at evidence, risk and return.
A buyer may reduce their view of value if the business has:
These issues do not always prevent a sale, but they can have a negative impact on the buyer’s confidence. They may lead to price reductions, deferred payments, earn-outs, indemnities or overall, more cautious deal terms.
For example, if a single customer generates a significant proportion of revenue without a written contract in place, a buyer may question how secure that income will be after completion.
This is where legal preparation can make a real difference. Well-drafted contracts, clear records and effective risk management can help strengthen buyer confidence.
Goodwill is often one of the most valuable parts of a business.
It reflects assets that do not appear on a balance sheet, such as:
The key question for buyers is whether that value is transferable.
HMRC guidance makes clear that goodwill valuation requires proper analysis and that the value of a company is not necessarily found by simply adding goodwill to the value of tangible assets.
For a seller, the key point is that goodwill needs to be supportable.
A buyer will want to understand whether goodwill belongs to the business or whether it is closely tied to the owner personally. If clients only stay because of the current owner, that may create key-person risk. If the business has a recognised brand, repeat customers, strong systems and transferable relationships, the goodwill is likely to be more attractive.
Before going to market, it is sensible to look at the business from a buyer’s perspective.
This does not mean trying to make the business look perfect. It means understanding where value is strong, where the risks are, and what can be put in better order before conversations become serious.
Areas worth reviewing include:
This is also a good time to think about whether the proposed sale is likely to be a share sale or an asset sale.
In a share sale, the buyer purchases the shares in the company. The company continues to own its assets and remains subject to its existing rights, obligations and usually the company’s liabilities, subject to the terms negotiated in the sale agreement.
In an asset sale, the buyer purchases selected assets and may take on selected liabilities, such as contracts, equipment, goodwill,and/ stock and employees. Some contracts, licences and property arrangements may need third-party consent before they can transfer.
Each structure has different legal, tax, accounting and commercial implications, including potential VAT, stamp duty, stamp duty land tax and capital gains tax considerations, so specialist legal and tax advice should be taken early.
If you are preparing for a sale, our corporate team can help you review your company documents, contracts and likely due diligence issues before you approach buyers. This can help you understand where a legal issue may affect buyer confidence, deal structure or the timetable for transaction completion.
While you cannot control market conditions, you can improve how attractive and sale-ready your business appears to buyers.
Practical steps may include:
This is where early legal advice can add real value. At Myers & Co, our Corporate and Commercial team regularly work with business owners before a sale process begins, helping them identify issues that could affect valuation, buyer confidence or deal progression.
Ideally, before you begin speaking with potential buyers.
Many business owners only seek professional advice once a sale is underway, but by that stage issues identified during due diligence can already be affecting buyer confidence, deal terms, deal timetable and ultimately the price being offered. Taking advice early gives you time to address potential concerns before they become negotiating points.
An accountant, tax adviser or corporate finance adviser can help with valuation modelling, tax considerations and financial presentation. Our specialist solicitors can help identify legal issues that may affect the sale, including company structure, contracts, property, employment arrangements, shareholder matters and due diligence preparation.
This joined-up approach is often the most useful. A valuation figure on its own only tells part of the story. The more practical question is whether the business is ready to support that valuation when a buyer starts asking detailed questions.
A realistic valuation is not about talking down the success of your business. It is about understanding what a buyer is likely to value, what they may challenge, and what you can do before going to market.
For many owners, this preparation can make the sale process feel less uncertain. It can also help avoid surprises during due diligence, when unresolved issues may be used to renegotiate price or delay completion.
If you are thinking about selling your business, Myers & Co can advise on the legal preparation involved, including company documents, shareholder arrangements, contracts and due diligence. Speaking to our team early can help you approach the market with clearer expectations and a better understanding of the legal issues that may influence your sale. Give us a call, or make an enquiry to find out how we can help.
