The short answer. A buyer of a small UK company usually starts with its maintainable EBITDA, the profit it can keep making before interest, tax, depreciation and amortisation. They multiply it by a market multiple to get the value of the business, then take off net debt and adjust for working capital to reach the price for the shares. For a company with about £200,000 of EBITDA, UK sales in the first half of 2026 averaged about 3.6 times EBITDA (Dealsuite).
The four steps
| Step | What it is | Where the figure comes from |
|---|---|---|
| 1. Maintainable EBITDA | The profit the business can keep making, after putting owner's pay, rent and one-off items on a normal footing | The accounts and management accounts, adjusted |
| 2. The multiple | What buyers pay for each pound of that profit | Recent sales of similar companies, adjusted for this one |
| 3. Value of the business | Step 1 times step 2, known as enterprise value | The calculation |
| 4. Price for the shares | Enterprise value, less net debt and debt-like items, plus or minus working capital against its normal level | The balance sheet at completion |
Step 1: the profit a buyer will accept
A buyer does not take reported profit at face value. Their accountants rebuild it, and every adjustment moves the price by the multiple. The usual ones:
- Owner's pay. If you pay yourself mostly in dividends, a buyer deducts a market salary for the person who will do your job.
- Rent and charges between related companies. Rent paid to your own property company is reset to a market rent, up or down.
- One-off items. A legal claim, a relocation or a lost contract that has been replaced is added back, but only with evidence.
- Development and other costs on the balance sheet. If the spending recurs every year, a buyer treats it as a cost.
Many small companies file no profit and loss account at Companies House, so the buyer works from your management accounts. If they do not agree with the full accounts, the buyer's confidence, and the multiple, falls.
Step 2: the multiple
Multiples rise with size. Dealsuite's figures for UK sales in the first half of 2026 run from about 3.6 times EBITDA for a business with £200,000 of EBITDA to about 8.2 times at £10m. Within any size band, these move the multiple:
| Pushes it up | Pushes it down |
|---|---|
| Recurring or contracted income | One customer above a quarter of sales |
| A team that runs the business without the owner | Everything depends on the owner |
| Monthly management accounts that agree to the full accounts | Records a buyer cannot check |
| Steady growth and good cash conversion | Falling sales, or profit that does not turn into cash |
Steps 3 and 4: from the value of the business to the price for the shares
The multiple gives the value of the business with no debt and a normal level of working capital. The buyer then takes off, pound for pound:
- Debt and debt-like items: bank loans, finance leases, money owed to related companies, overdue tax, and customer deposits for work not yet done.
- Any shortfall in working capital against the normal level, usually set from the last 12 month ends. Leave more than normal and the price usually goes up by the excess.
Cash in the business is usually added. That is why two companies with the same profit can sell for very different prices.
A worked example
Illustrative example. Fictional business. A company with maintainable EBITDA of £200,000 at 3.0 to 4.5 times has a business value of £600,000 to £900,000. With net debt of £150,000 and working capital £20,000 below normal, the price for the shares is £430,000 to £730,000.
Other methods, and when they apply
- Net assets. Used for property and investment companies, and for loss-making businesses where the assets are worth more than the profit.
- Discounted cash flow. Used for larger companies with forecasts a buyer can rely on. For most SMEs the multiple is the cross-check that matters.
- Rules of thumb on turnover. Some sectors quote them, but they ignore profit and debt. Treat them with caution.
An indicative value range or a formal valuation?
An indicative value range shows you roughly where the price could land and what moves it, so you can decide when to sell and what to fix first. It is what most owners need a year or two before a sale. A formal valuation is a different piece of work, needed for tax, a divorce, a shareholder dispute or a court, and it comes from a specialist valuer. The sale readiness review includes an indicative value range, not a formal valuation.
The steps to take before a sale, and the timing of the tax change on 6 April 2027, are in how to sell my business in the UK.
Questions
Is there a free way to value my business?
Online calculators give a rough figure, usually from turnover or profit and a sector multiple. They cannot see the adjustments a buyer will make, your debt or your working capital, so treat the answer as a starting point.
How many times profit is a small business worth?
At this size, UK sales commonly sit at about 3 to 5 times EBITDA. Where a company lands in that range depends on how much of the profit a buyer accepts and how much rests on the owner.
Does my turnover matter?
Less than profit. A buyer pays for the profit the turnover produces, so two companies with the same sales can be worth very different amounts.
Is an indicative value range a valuation?
No. It is an indicative value range, not a formal valuation or an opinion of value, and it should not be used for tax, legal or court purposes.
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