“There comes a pivotal moment in every entrepreneur’s journey where the question changes from ‘How do I grow?’ to ‘What is this worth?’ Whether you are preparing for a strategic exit, navigating a partnership transition, or planning for future investment, the realization ‘I need a business valuation’ is the first step toward securing your financial legacy.”
However, a valuation is more than just a number on a spreadsheet; it is a comprehensive look at your company’s health, market position, and potential. At Consult EFC, we specialise in turning that ‘need’ into a roadmap for value acceleration.
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Most SME owners make big calls on gut feel because there’s no time to do anything else. Then a buyer asks for a price, a bank asks for comfort, or a shareholder wants out, and suddenly everything depends on one thing: a number you can stand behind.
A business valuation is a fact-based estimate of what your business is worth today. It uses your financials, then adjusts for risk, growth, cash flow, and how dependent the company is on you. It’s rarely one “magic” figure; it’s usually a range, and the range tightens when the evidence is strong.
Below are 12 clear signs you may need a business valuation, plus a simple plan you can follow this week to get yourself ready to speak with Consult EFC.
Used by founders to prepare for £1M–£20M+ transactions. Get the clarity you need to negotiate with confidence
Free Valuation Strategy Audit
Stop guessing your business value. Spend 30 minutes with Kishen Patel to review your financial data and determine the right methodology for your goals.
Strictly for SME & SaaS founders. 100% confidential.
The 12 signs you need a business valuation (and why each one matters)
You’re thinking of selling in the next 6 to 24 months
If you wait until you’re at the starting line, you’ll price the business while you’re also trying to run it. A valuation now gives you a target and time to fix the issues that drag value down (messy accounts, customer concentration, owner reliance). It also helps you decide if you’re selling at the right time.A buyer, competitor, or broker has approached you with “interest”
Interest isn’t a deal, it’s a test. Without a valuation, owners often anchor to the wrong thing (last year’s profit, a rumour about multiples, or the buyer’s first number). A valuation helps you respond with calm, and it gives you a rational “walk-away” point.You’re bringing in an investor, raising funds, or issuing new shares
Equity raises are really price negotiations with long-term consequences. A valuation frames the conversation, supports the share price, and helps you avoid giving away too much for too little. It also sets expectations on dilution, control, and investor rights.You’re applying for a loan, refinance, or new facility
Lenders look at affordability first, but they also care about risk and security. A valuation helps you show the strength of the business, explain performance, and back up the case for terms that work for you. It can also highlight where cash flow needs tightening before you apply.You’re buying out a partner, or a shareholder wants to exit
This is where “fair” becomes personal. If there’s no agreed method, the discussion can drift into opinions and old arguments. A valuation gives a neutral reference point and helps you structure the deal (price, timing, earn-out, and how you’ll fund it).You’re planning a management buyout (MBO) or internal succession
MBOs live or die on credibility. Management needs to know what they’re buying, and you need to know what you’re giving up. A valuation supports funding conversations, sets a sensible price range, and helps you plan a handover that doesn’t damage the value you’re trying to realise.Divorce, probate, or family transfer means shares need a fair value
These situations are hard enough without a fight over numbers. A HMRC compliant valuation can provide a defensible basis for negotiation, reduce conflict, and support paperwork and tax planning. It’s also a way to separate emotion from value.You’re setting or reviewing a share option scheme (EMI or similar)
Option schemes can be great for retention, but only if the valuation logic is sound. A weak approach can create problems later, including disputes with staff when the company grows, or questions over what was “fair” at grant.You’re growing fast and want to check if value is keeping up with effort
Growth is noisy. Revenue can surge while margins fall, or customer support costs balloon. A valuation helps you test whether the growth is creating real value (repeatable profit and dependable cash) or just busyness with risk attached.Profits look strong, but cash is tight (or swings month to month)
Profit is opinion, cash is fact. If working capital is absorbing money (stock, WIP, debtor days), buyers and lenders will discount the business because the cash story doesn’t match the profit story. A valuation forces you to face how cash flow affects what someone will pay.The business depends heavily on you, and you want to reduce key-person risk
If you’re the top salesperson, main delivery lead, and the only one who knows the numbers, the business can feel like a job that happens to have staff. That dependence often lowers value, because the buyer is buying your stamina. A valuation helps you quantify the discount and plan what to change (team depth, systems, delegated client ownership).You suspect your accounts don’t reflect “true earnings” (one-offs, founder pay, personal costs)
Many owner-managed businesses run expenses in a practical way, and that’s normal. The issue is when nobody can quickly separate trading performance from one-off items. A valuation includes “normalising” adjustments, but if records are unclear, the buyer will assume the worst and push price down.
💡 Kish’s Pro Insight: > “Most owners wait until they are burnt out to value their business. The highest valuations go to founders who treat their exit like a 24-month project, not a 2-week fire sale. If you’ve hit more than 3 signs on this list, your first move should be an indicative valuation to see where the gaps are
If any two or three of these signs fit, you’re probably past the point of guessing. The goal is not perfection, it’s a defensible range you can use in real decisions.
How Consult EFC Conducts a Professional Business Valuation
A useful valuation is built from evidence, not optimism. It brings together the numbers and the story behind them, then turns that into a value range with clear assumptions. If those assumptions change, the value changes, and that’s the point. You can see what matters and what to improve.
Most SME valuations draw from a few common approaches:
- Earnings multiple: a multiple applied to maintainable profit (often EBITDA or operating profit). In early 2026, many UK SME deals are still landing around 4x to 6x EBITDA for solid businesses, with higher multiples possible for lower-risk, well-run firms.
- Discounted cash flow (DCF): a forecast-driven method that’s sensitive to cash and risk, used when forecasts are strong and the business is stable enough to model.
- Asset-based value: used when assets drive value (property, plant, stock), or when profitability is weak.
A quick example makes it real. If maintainable EBITDA is £500,000 and the evidence supports a 5x multiple, that suggests £2.5m enterprise value before adjusting for net debt (debt minus cash). The multiple isn’t a reward for hard work, it’s a price for risk and repeatability.
What lifts value is usually simple to describe and hard to prove: consistent margins, reliable cash, a strong pipeline, low churn, and a business that runs without the founder in every decision.
When considering an exit strategy, understanding industry EBITDA multiples is only half the battle. To reach a fair market value, a valuer must also look at your maintainable earnings and identify any key-person discounts that might apply
The numbers: clean earnings, balance sheet health, and reliable cash flow
Expect any valuation to start with your last 3 to 5 years of accounts and tax filings (where relevant), plus recent management accounts. The aim is to understand what the business can generate on a steady basis, not what happened in one unusually good or bad year.
The key work is often “normalising” earnings. That can include removing genuine one-offs (a legal dispute, a one-time IT project, a rare bad debt), and adjusting owner pay and perks to a market-rate salary. It can also mean separating personal costs from business costs, then showing the clean trading result.
A valuer will also look closely at:
- revenue split by product, service line, and customer
- gross margin trends and pricing power
- overheads, and which costs scale with growth
- working capital (stock, WIP, debtor days, creditor days)
- debt terms, covenants, and any hidden liabilities
Messy books don’t just slow the work down. They reduce trust, and reduced trust usually shows up as a lower price, tougher terms, or both.
The story behind the numbers: risk, growth, and what buyers will challenge
Two businesses can earn the same profit and get very different valuations. The difference is often risk, and risk is not a feeling. It’s what a buyer can point to in due diligence.
Common pressure points include customer concentration, contract length, churn, supplier dependency, and whether the pipeline is real or hope. If 40 percent of revenue sits with one client on a rolling 30-day agreement, the “multiple” drops for a good reason.
Evidence that tends to support a stronger valuation includes recurring revenue, signed contracts, documented processes, and a team that can deliver without the owner in the middle. Buyers also look for basic hygiene: clear IP ownership, compliant employment paperwork, and systems that produce reliable numbers.
This is why owners sometimes feel whiplash between what they think the business is worth and what the market will pay. The valuation is a range shaped by risk and proof, not by how busy you are.
What to do next, a simple plan you can action this week
You don’t need a 40-page report to start making better decisions. You need clarity on your goal, your timing, and the facts that will stand up in a negotiation.
Here’s a practical sequence that fits around a normal week:
- Name the decision you’re making (sell, raise funds, buy out a shareholder, refinance, option scheme, divorce or probate). The “right” valuation approach depends on the decision.
- Pick your time horizon (this quarter, 6 to 12 months, or 12 to 24 months). Time changes what’s possible.
- Pull a clean pack of information (use the checklist below). Don’t overthink presentation, focus on completeness.
- Write down what’s unusual in the last 12 to 24 months (one-offs, changes in pricing, lost clients, big hires, new products). This helps separate trend from noise.
- Get clear on deal shape, not just price. Terms matter: debt-free cash-free, working capital targets, earn-outs, deferred consideration, and personal guarantees can swing the real outcome.
A sensible timeline is often two speeds. An indicative range can be turned around quickly once the key data is in place. A formal valuation report takes longer because it involves deeper analysis, more evidence, and clearer documentation.
Your 30 to 60 minute prep checklist before you speak to Consult EFC
Pull these items together in one folder:
| What to gather | What “good” looks like |
|---|---|
| Latest year-end accounts | Signed, final, with notes if available |
| Last 12 months management accounts | Monthly P&L and balance sheet, with comparatives |
| 3 to 5-year revenue and profit trend | Simple summary showing direction and volatility |
| Debt list | Lenders, balances, interest rates, repayment terms |
| Customer split | Top 10 customers and percent of revenue |
| Key contracts | Customer and supplier terms, renewal dates, notice periods |
| Cap table | Who owns what, including any options or loan notes |
| Forecast | Next 12 to 24 months with key assumptions |
| The decision you are making | Sell, raise, buyout, loan, options, family transfer |
Write down clear answers to these five questions:
- What’s your target date for the decision or transaction?
- What type of deal do you expect (asset sale, share sale, investment round)?
- How much funding do you need, and what will it be used for?
- What does a “good exit” look like for you (money, timing, involvement after sale)?
- What red flags do you already know about (customer loss risk, disputes, weak records)?
This prep sounds basic, but it saves time and keeps the first conversation focused on what matters.
Pick the right level of valuation support, indicative range versus formal report
An indicative valuation range can be enough when you’re planning ahead. It works well if you want to sense-check an approach from a buyer, test if a fundraise makes sense, or set a rough target for the next 12 months. It’s also useful when you’re deciding whether to fix value blockers now or wait.
A formal valuation report is smarter when the stakes are higher or other parties need a defensible basis. That includes investors, lenders, shareholder exits, disputes, EMI and option planning, and probate or divorce matters. Formal work also helps when deal terms are complex, since you can test different outcomes (for example, a higher headline price with a long earn-out versus a lower price paid on completion).
Once you have a valuation range, use it properly. Set a walk-away point, decide what terms you will and won’t accept, and create a 90-day plan to lift value through evidence (better reporting, reduced owner dependence, stronger contracts, clearer pricing, improved cash conversion).
Our Service
If you need a business valuation, it’s usually because you’re about to make a decision that can’t be undone easily. The right valuation brings clarity, improves your negotiating position, supports fairness between shareholders, and reduces nasty surprises when diligence starts.
Pick the one decision you’re facing, gather the checklist, and speak to Consult EFC about the next step, whether that’s an indicative valuation range or a formal report. A calm, defensible number beats a rushed guess every time.
Free Valuation Strategy Audit
Stop guessing your business value. Spend 30 minutes with Kishen Patel to review your financial data and determine the right methodology for your goals.
Strictly for SME & SaaS founders. 100% confidential.
About the Author: Kishen Patel
Kishen Patel is a strategic CFO, Investment Banker and the founder of Consult EFC, where he helps SME owners navigate the complexities of financial growth and exit planning. With a deep focus on value acceleration, Kishen specialises in transforming the “I need a business valuation” moment into a strategic advantage for founders. By combining rigorous financial analysis with a human-centric approach to deal-making, he ensures that business owners don’t just get a number, but a defensible roadmap for their next big move.
Connect with Kishen: View LinkedIn Profile | Work with Consult EFC | ICAEW Credentials
Call us on +44 7767 629 008.
