From the information you have provided so far, we believe that it is likely your business will be valued on a multiple of adjusted profit, adjusted for certain factors. To calculate an approximate valuation for your business, we need you to answer a few more questions.
Most businesses are valued as a multiple of EBITDA. This stands for earnings before interest, taxes, depreciation and amortisation. The valuation will be based on a multiple of ADJUSTED profit. This is the profit the acquirer is expecting post-sale.
To work out the adjusted profit figure, you will need to take your current profit figure and apply ‘add-backs’. These include:
- One-off expenses – for example, you paid for a new website, you took legal advice that year, etc.
- Director costs – you will no longer own the business, therefore remove all costs relating to the directors including salaries, pension contributions, PMI, car leases etc.
- Anyone else exiting the business – you can remove their costs.
You will also need to apply ‘take-offs’ – a take-off is a new expense not included in your accounts, but that will be included in a buyer’s future P&L.
Take-offs will include:
- If you and or the other owners are remaining in the business, what are fair market salaries for your roles? Bear in mind employer NI, pension contributions and other benefits.
- If other advisers are exiting, do these need replacing? Include fair market salaries for these. Bear in mind employer NI, pension contributions and other benefits.
- Does the business need other resource, are you currently running the firm overly lean? You need to include any other costs here.
Note – this is for illustrative purposes only. All acquirers will have their own calculation for adjusting the EBITDA based on their business and the cost base, and what they deem are fair market salaries.
We believe that the value of your business is likely to fall into the following range.
If you would like to gain a more accurate valuation please contact is on 0113 4656 111 or email
hello@melo.co.uk
*Our calculator is designed to give you an indication of value, not a formal valuation. The true figure will depend on the buyer, their strategy and current market conditions. Valuations also change over time. Each buyer will look differently at a business, which can result in very different offers. This is why we provide a range rather than a single figure.
The valuation method used also matters. Smaller business or client banks are often valued on a multiple of recurring revenue, while larger firms, or those with staff and premises, will probably be valued on the multiple of adjusted profit method.
Finally, remember that your personal objectives are just as important, if not more so, than the headline number. Higher offers can come with tougher terms and the right offer for you may not be the highest.