What Buyers Actually Measure
Most business owners overestimate their company’s value because they measure what it means to them rather than what it is worth to a buyer. Buyers pay for future cash flows and a business that works without you.
The Five Metrics
1. Adjusted EBITDA — Your operating profit after removing personal expenses and one-off costs. UK SMEs typically sell at 3x-7x adjusted EBITDA. The higher the adjusted figure, the higher the price.
2. Revenue concentration — If one client accounts for more than 20 per cent of revenue, buyers see risk. A diversified base where no single client exceeds 10-15 per cent commands a premium.
3. Recurring revenue — Monthly retainers, subscriptions, and long-term contracts are worth more than one-off project fees. Predictable revenue reduces buyer risk.
4. Owner dependency — If the business cannot function without you for six months, the price drops. Buyers want systems, documented processes, and a management team — not a person.
5. Clean records — Messy accounts, unresolved tax disputes, or missing contracts kill deals. Vendor due diligence preparation is one of the highest-return investments you can make.
The Key Takeaway
Start preparing at least two to three years before you plan to sell. The business is part of your estate, and with BPR now capped at £2.5 million for full relief, exit planning and estate planning should work together.
Talk to The Legacy Wills Company about protecting the proceeds of your business sale.