Home • Services • Corporate Finance • Business Valuation

Valuing your business

Business Valuation Services

Understand the drivers of value in your business

Valuations

Our Valuations team is a fundamental part of our Corporate Finance practice, providing the intellectual framework for all of the transaction work that we do, as well as routinely delivering clear, robust reports that satisfy HMRC, the courts and prospective investors alike.

Whether you’re planning an exit, raising capital, incentivising staff, resolving a dispute, needing support with financial reporting, or just carrying out a strategic review of your operations, our valuation specialists can provide the impartial insight you need to move forward with confidence.

Our approach to business valuation

Every valuation starts with understanding the “why.” So, whether you’re preparing for a sale, considering pricing of an acquisition target, navigating a dispute, drafting disclosures in your financial statements, or just planning for the future, we begin by getting a clear picture of the specific circumstances and objectives behind your need for a valuation. This context is crucial as it ensures the methodology we apply is not only technically sound, but also commercially relevant.

Our dedicated team will work closely with you. From initial scoping to final delivery, our approach is collaborative, confidential, and built around your needs.

Valuations tailored to you

We carry out business valuations across a wide range of scenarios, always applying the most appropriate methodology to suit the specific purpose and context. Common situations we advise on, across all industries, include:

Valuations for business sales or exits
Valuations for acquisitions and mergers
Valuation of specific assets, including intangible assets
Shareholder exits and minority shareholdings
Management Buy-Out (MBO) and Buy-In (MBI) valuations
Divorce and matrimonial disputes
Expert witness and Single Joint Expert (“SJE”) valuations for audit or financial reporting purposes (e.g. share options, IFRS/FRS 102 Fair Value compliance, Purchase Price Allocations)
Tax-focused valuations for HMRC, including growth shares, EMI schemes and CGT planning

Each engagement is tailored to ensure the valuation output is robust, defensible, and aligned with the relevant regulatory or commercial requirements.

Frequently asked questions (FAQs)

Why do businesses typically need a valuation?

Businesses typically require a valuation for one of four main reasons:

1. Tax purposes
A valuation may be needed to calculate tax liabilities, such as capital gains tax or inheritance tax when business shares are transferred.

2. Financial reporting
Certain accounting standards require assets or liabilities to be shown at fair value in the accounts, rather than at historic cost. A valuation ensures these figures are accurate and compliant.

3. Disputes or disagreements
Valuations often play a crucial role in resolving conflicts. This could involve shareholders who have fallen out, divorcing couples dividing business assets, or disputes with insurers or third parties.

4. Strategic planning
Sometimes, valuations are sought not because of an external trigger but as part of forward-looking strategy. This might be in preparation for a future sale, to attract investment, or to support funding applications.

What are some of the most common triggers for needing one?

There are many reasons why a business valuation might be required, but the most common triggers are tax-related. Often, something has happened to prompt the need for a formal assessment of value. This could be the death of a shareholder, the issue of shares to an employee, or the implementation of a share option scheme, all of which require a tax valuation.

Valuations may also form part of the annual reporting cycle. For certain businesses, accounting standards require some assets or liabilities to be reported at fair value rather than historic cost. In these cases, a valuation ensures compliance with financial reporting requirements.

Disputes and disagreements are another frequent driver. When shareholders or business partners fall out, the question of value quickly comes into play. In such scenarios, valuations often need to take account of shareholders’ agreements or the legal framework governing the relationship between the parties.

Finally, valuations can also be forward-looking. Business owners may seek one simply as part of their strategic planning—whether they’re considering an exit, exploring ways to attract investment, or shaping their long-term growth plans.

What are the key methods used to value a business?

The methods used to value a business are all grounded in established economic principles. International valuation standards recognise three core approaches:

1. The Market Approach
This method looks at evidence from comparable businesses or transactions in the market to determine value.

2. The Income Approach
Here, the focus is on the future earnings or cash flows a business is expected to generate, with those figures discounted back to present value.

3. The Cost Approach
This approach considers the costs required to replace the business’s assets, adjusted for depreciation and obsolescence.

Does the method change depending on the purpose (e.g. sale, tax planning, dispute resolution)?

The short answer is: absolutely, yes.

The purpose of a valuation is fundamental, because it directly influences the approach taken and, ultimately, the value derived.

For example, if the valuation is required for tax purposes, then tax legislation sets clear parameters. The definition of “open market value” will be prescribed, as will the type of information a valuer can rely on. Importantly, hindsight cannot be applied, only the facts known as at the valuation date may be considered.

By contrast, a valuation for strategic purposes, such as preparing for a sale or seeking investment, will look very different. In this case, valuers can often take a broader view of the business, its market position, and its future potential.

This distinction is crucial, because the same business could have significantly different values depending on the purpose of the valuation. Setting this out clearly at the outset helps avoid confusion and ensures the valuation is both relevant and reliable.

What is the difference between tangible and intangible assets in a valuation?

Intangible assets are assets without physical form or substance. They often arise from contractual rights, established practices, or the reputation and goodwill a business has built over time. Think of a local bakery you always return to because of its outstanding cakes, that customer loyalty and reputation is an intangible asset.

What makes intangible assets particularly interesting is that they rarely appear on a company’s balance sheet. This raises an important question: how do you ascribe value to something that isn’t recorded in the accounts?

The answer lies in earnings. Intangible assets typically reveal their value through an enhanced level of profitability. For example, if you hold the rights to sell a well-known soft drink brand, you would expect to charge a premium compared to a generic competitor. That ability to generate higher earnings is where the value of the intangible asset becomes visible and measurable in a valuation.

What makes valuing a family business more complex?

Family businesses bring unique challenges when it comes to valuation. The biggest issue is the overlap of roles. Most family members are wearing three different hats at the same time:

Family member – as a father, mother, son, daughter, or sibling, emotions and relationships inevitably play a part.
Shareholder – with a significant portion of their personal wealth tied up in the business, family members want to see a return on their investment.
Director – many family members also sit on the board, carrying legal and strategic responsibilities for the day-to-day running of the company.

The tension between these roles can create significant conflicts of interest. For example, what makes sense from a family perspective may not align with the best interests of shareholders or the duties of directors. These competing priorities add a layer of complexity to both running and valuing a family business.

How do legacy, succession plans, or informal roles affect value?

Legacy, succession planning, and the informal roles that often exist within family businesses can have a significant effect on value.

One of the first issues to consider is how family members are remunerated. It is common for them not to charge the business a full commercial rate for their work. From a valuation perspective, however, the question is always: what would the market consider their contribution to be worth?

If a family member holds a unique or “special” role within the business, valuers must assess what it would cost to replace them in the open market. More often than not, this cost is far higher than the salary they currently draw. This is because family members may be willing to accept lower pay in the short term, with the expectation of future dividends, long-term rewards, or simply out of loyalty to the business.

These dynamics rooted in legacy and family succession make valuing family businesses more complex than valuing non-family-owned companies.

What are the tax consequences of getting a valuation wrong?

A large proportion of business valuations are carried out for tax purposes, often triggered by a transfer of value. This might involve issuing shares to employees, transferring shares between family members, or other ownership changes where money may or may not have changed hands.

In these cases, the valuation forms the basis for calculating the tax due on the transaction. If the valuation is too high, the result could be an overpayment of tax. If it is too low, there is a risk of underpayment, something that may later be challenged by HMRC.

In short, getting the valuation right is critical. An inaccurate figure doesn’t just affect the fairness of the transaction; it can also create unnecessary tax liabilities or disputes further down the line.

How do accurate valuations support compliance with HMRC?

Accurate valuations are particularly important where HMRC is involved. A common example is the granting of share options to employees, especially under schemes such as the Enterprise Management Incentive (EMI).

In these cases, businesses have the option to agree the valuation with HMRC in advance. While this step isn’t mandatory, it can help avoid significant problems later on. If the valuation isn’t agreed upfront, issues may arise when employees exercise their options, convert them into shares, or sell those shares. Potential buyers could challenge the valuation, creating uncertainty and complications in the transaction.

By thinking ahead and agreeing a valuation with HMRC early in the process, businesses can provide clarity, reduce risk, and ensure smoother outcomes for everyone involved.

How do you ensure your valuations meet professional and regulatory standards?

We are authorised and regulated by the Institute of Chartered Accountants in England and Wales (ICAEW), and play an active role in the ICAEW’s Valuation Group. Our work is also carried out in line with international valuation standards, which set out the baseline level of content, analysis, and professional rigour expected when deriving a valuation.

This ensures every valuation we deliver is robust, transparent, and meets the highest professional and ethical standards.

What are some of the most common myths about business valuation?

One of the biggest myths about business valuation is that it can be reduced to a simple formula or multiple of earnings. In reality, every valuation is unique. Producing an accurate figure requires professional judgment, experience, knowledge of case law, and an understanding of economic principles and global market factors at the time of the valuation. There is no one-size-fits-all approach.

Another misconception is that a reliable valuation can come from a “black box.” While modern tools and data analysis can provide valuable context and support, they cannot replace the careful judgment and expertise of a professional valuer. AI and automated tools are helpful for analysis, but they are not yet capable of delivering a fully reliable valuation on their own.

What are the biggest mistakes business owners make when trying to estimate their own value?

The balance sheet is often the most misunderstood of the primary financial statements. A frequent error is double counting: business owners may calculate a value based on earnings and then add the balance sheet on top, without recognising that the balance sheet already drives the earnings that form the basis of value.

Other common mistakes include:

Underestimating the owner’s contribution: Many assume the business can run without them. For small businesses in particular, the owner’s input is often critical, and failing to account for this can undervalue the business.
Misunderstanding debt, cash, and working capital: Owners sometimes overlook the nuances of the business’s working capital cycle. Seasonal fluctuations, such as building up stock at one time of year or holding excess cash at another, can significantly affect the value if not properly considered.

By addressing these areas carefully, a valuation can more accurately reflect the true worth of the business and avoid common pitfalls.