Most owners have a figure in their head for what their business is worth – and it’s usually a guess, not a valuation. Valuation is an evidence-based estimate; price is what a buyer actually agrees on the day, and the two often differ sharply.
Private company valuations are typically built around a multiple of adjusted EBITDA, and that multiple varies hugely by size and sector – small owner-run firms often sit around 2-4 times, larger systemised businesses much higher. Buyers then discount for owner dependency (they normalise your salary to what a real manager would cost), customer or supplier concentration, and weak systems.
An unrealistic valuation doesn’t just disappoint at sale – it wrecks succession maths for children buying in, and distorts inheritance tax planning, including whether your estate sits within the £2.5 million Business Relief cap from April 2026. It also determines whether a cross-option agreement’s insurance actually covers a buyout. Get the business properly valued, regularly, before someone else does it for you under pressure.