Valuation guide
What is your business worth?
How a buyer values a business like yours, what moves the number, and a free, honest valuation from people who buy and run businesses in your sector.
Free. Confidential. No obligation. No NDA needed for a first conversation.
The method
How is a business valued?
An owner-managed trade business is usually valued as a multiple of its sustainable EBITDA. The multiple reflects how confident a buyer is that those earnings will continue without you.
EBITDA is earnings before interest, tax, depreciation and amortisation. “Sustainable” means the profit the business makes in a normal year, under normal ownership. To get there, a buyer adjusts the accounts. One-off costs, such as a legal dispute or a large bad debt, are added back. So is any salary or pension you pay yourself above what it would cost to replace you. A one-off windfall contract is taken out.
That figure is then multiplied to give the enterprise value: what the business itself is worth. It is not yet the cheque you receive. To get from enterprise value to the price for your shares, a buyer adds any surplus cash, takes off bank debt, finance leases and other debt-like items, and adjusts if working capital is above or below a normal level for the business.
In trades with project work, that last point matters. Retentions, work in progress and payment terms all sit in working capital, which is why a fair agreement on what counts as “normal” is worth getting right early.
Up or down
What moves the multiple up or down
Two businesses with the same profit can be worth very different amounts. These six things explain most of the gap.
Maintenance, service and framework contracts that renew each year are worth more than one-off projects.
If you price the work, hold the key accounts and sign every cheque, a buyer is paying for you as much as the business.
One customer providing a large share of revenue is a risk a buyer will price. A wide spread supports a higher multiple.
F-Gas, Gas Safe, NICEIC, MCS, CHAS and framework positions take time to win and are part of what a buyer is getting.
Secured work at a healthy margin gives a buyer confidence in next year. Uncontracted pipeline carries far less weight.
Larger businesses attract more buyers and higher multiples, because they are less exposed to any one person, customer or contract.
How these play out in your trade: selling an HVAC business, selling an M&E business, selling an Engineering business, selling a Renewable Energy business, selling a solar or BESS business and selling a Construction business.
A word of caution
Why is a broker’s valuation often higher than what you receive?
A broker’s number is usually a headline enterprise value, often before adjustments for debt, working capital and owner dependence. The price a buyer pays for your shares comes after all of those.
A high figure helps win the instruction, and it may never be tested until you are months into a sale. By then, the gap tends to be closed through price chips in due diligence or a larger share paid as an earn-out. We would rather give you a realistic number at the start. We have written about the five pitfalls of business broker valuations in more detail.
Deal structure
Selling 40% to 100%: how the structure changes what you get
Selling 100% gives you all your cash at once and a clean exit. Selling part of the business gives you cash now and a retained stake that can be worth more later.
We buy 40% to 100% of a business. With a full sale, the value is paid for your shares at completion, less any agreed deferred element, and you step away on an agreed timetable. With a partial sale, you are paid for the share you sell, and you keep the rest. If the business grows under the group, your retained stake grows with it, and there is an agreed route to sell it later.
Neither is better in general. It depends on how much cash you need now, how involved you want to stay, and how much you believe in the next five years of the business. We will set out both options side by side before you decide. Read more on how we buy businesses.
Straight answers
Business valuation, answered.
How much is my business worth?
Most owner-managed trade businesses are worth a multiple of their sustainable EBITDA, adjusted for debt and cash. The multiple depends on your sector, how much revenue is recurring, how reliant the business is on you, and how spread your customers are. Send us three years of accounts, or just describe the business, and we will give you an honest valuation for free.
What multiple of EBITDA do HVAC and Construction businesses sell for in the UK?
There is no single number. The multiple depends on the size of the business, how much of its revenue is recurring, how reliant it is on the owner and the quality of its contracts. Service-led trades with planned maintenance work tend to attract higher multiples than project-led Construction work, because the profit is more predictable. We do not publish ranges, because a figure without your accounts behind it is a guess. Send us three years of accounts and we will tell you where your business sits.
Is the valuation free?
Yes. If you send us your accounts or tell us about the business, Lee or Scott will come back with an honest assessment at no cost and with no obligation. We make our money by buying and running businesses.
Do I need accounts to get a valuation?
Not for a first conversation. A rough revenue and EBITDA figure is enough for an early view. For a proper assessment, yes: we ask for three years of accounts so we can see sustainable earnings, one-off costs and the trend. There is no NDA needed at the first conversation, and nothing you share goes any further.
What is the difference between enterprise value and the price I receive?
Enterprise value is what the business itself is worth, before debt and cash. The price you receive for your shares is enterprise value, plus surplus cash, minus debt and anything that behaves like debt, adjusted if working capital is above or below a normal level. That is why two offers with the same headline can pay very different amounts.
Want to know who you would be dealing with? Read about Verdani Capital or see the businesses in our portfolio.
Get a business valuation
Get an honest number, for free.
Send us three years of accounts, or just tell us about the business, and Lee or Scott will come back with an honest assessment within one working day.
- No NDA at this stage and no obligation
- Completely confidential. Nothing goes further
- You will speak to Lee or Scott, not an analyst
- We reply within one working day
Prefer to talk? Call 020 3475 5475
or email info@verdanicapital.co.uk
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