SME Business Valuation Services

Are you thinking about selling or merging your company? Perhaps you’re considering purchasing someone else’s stake in your firm or are involved in a management buyout. There are various scenarios in which you may require an accurate business valuation, and it’s crucial to get it right – undervaluing your business could result in significant financial loss while overvaluing it might discourage potential buyers. There’s also a range of complicated tax implications to consider.

At Mercian, our company valuation and tax experts go above and beyond the online business valuation calculators. We will identify and assess both your tangible and intangible assets so that you receive an SME business valuation that aligns with today’s market conditions, safeguarding you against any potential short-changing in the future. Get in touch with our friendly team, book an appointment online, or carry on reading for more information. We can also help your company with Payroll Management, Bookkeeping, and a wide range of other Accounting Services.

Why Choose Mercian?

At Mercian, our business valuation service offers valuable assistance in a multitude of scenarios, whether you are considering:

• Selling or merging your business
• Accepting a new business partner or change of ownership
• Undertaking a management buyout
• Attracting a new board member or shareholder
• Pursuing expansion opportunities
• Shaping your exit strategy or planning for retirement
• Managing the departure of partners, directors, or shareholders
• A valuation for probate, divorce, investment, or tax reasons

Business Valuation Reasons and Approach

Our approach to valuing your business is based on the motivations behind it. Whether you wish to make well-informed business decisions, address outstanding debts, or support future growth projections, the most common scenarios for getting a business valuation assessment are to:

• Aid a possible sale of your company – If your goal is to secure the highest bidder in a sale, for your business valuation process, we will aim to establish a fair market value. This refers to the monetary amount that both you and the buyer mutually agree upon for the asset transfers.
• Influence crucial investment opportunities – Have you attracted interest from a larger organisation aiming to expand your products/services on a bigger scale? To value your business, we will follow the guidelines of the investments standard measure. This metric offers a precise valuation customised to a specific level of investment, as opposed to the broader calculations typically employed in fair market value assessments (mentioned above).
• Embark on liquidation and business winding-up proceedings – You may have reached a point where settling debts to creditors is no longer feasible using your available cash reserves. As a result, to meet your obligations, you will likely be seeking a buyer so you can sell your business assets quickly. In these circumstances, it becomes necessary to calculate a forced liquidation value, operating under the assumption that the assets will no longer be utilised to generate revenue.

We will tailor the valuation process to the reasons behind why you wish to determine your business’s worth. So, put the online calculators aside and embark on the next chapter of your business journey with confidence by seeking expert and impartial guidance from our dedicated company valuation team.

How We Value Your Business

Valuing your SME business accurately goes far beyond putting a bottom-line figure on its finances, tangible assets, inventory, etc. While a review of the balance sheet is a valuable starting point (particularly when looking into a potential company sale), the true worth of most businesses exceeds their net assets alone.

Intangible assets and future potential can also play a significant role in determining your business’s true value. Our business valuation team will consider the following:

• Your business’s financial performance and brand strength – it’s important that you’ve maintained accurate tax returns and comprehensive financial statements (e.g., have selected add-backs such as management expenses, PAYE, salary, cars, pension, health cover, additional director payments, etc. been calculated alongside the main financials?). These records demonstrate the business’s past success and form a basis for future performance.
• Projected sales and roadmap – clear documentation on your business’s operations, strategy and goals for potential success will contribute significantly to the business valuation process.
• Existing customer base and the quality of relationships – transitioning from an SME to a larger organisation often depends on a higher number of clients rather than a small number that pay high fees.

We will also consider the experience of the management team, the effectiveness of the supply chain and workforce, and the potential tax implications involved in the transfer of ownership (so that everyone is aware of any future liabilities that may arise).

What is Your Company’s Value?

Every financial detail, along with various intangible factors, will be considered when determining your business’s value. The specific calculation we use relies on the assessment’s purpose, but the most commonly utilised one is:

• [Adjusted net profit of business] x [Multiplier of industry] = Valuation

The key element in this formula is the multiplier, a figure that can be influenced by several factors, including your business’s industry, profit margins, balance sheet, customer base, suppliers, and contracts.

While there’s no fixed formula for determining this multiplier, it’s been suggested that for SME businesses, it can range from 1 times adjusted net profit to 10 times adjusted net profit.

For example, a business with £125,000 in net profits, using a moderate multiplier estimate of 5 times adjusted net profit, the business’s valuation could be calculated as follows:

• £125,000 x 5 = £625,000

Need Business Valuation Advice?

An accurate business valuation assessment can be complex, but our professional team is here to guide you through the process. We can also help with Year End Accounts, Bookkeeping Services, Payroll Management, and much more. Get in touch with us today, either through our online booking form, by calling 01743 562430, or by emailing hello@mercianaccountants.co.uk.