How can an accountant help me value my business?

Valuing a business involves much more than looking at profits or cash flow. It requires a detailed understanding of your accounts, market conditions, and intangible factors such as goodwill and brand strength. Accountants use proven valuation methods and their financial expertise to calculate what your business is truly worth.

A professional valuation can help you make informed decisions about selling your business, bringing in investors, or planning your next steps for growth.

Why you might need a business valuation

Business valuations are useful for several situations, including:

• Selling your business or merging with another company.

• Attracting new investors or business partners.

• Negotiating bank loans or raising finance.

• Transferring ownership or succession planning.

• Tax planning or resolving shareholder disputes.

In each case, an accountant ensures the valuation process is objective, compliant, and based on accurate financial data.

How accountants value a business

Accountants use a combination of methods depending on the size, structure, and industry of your business. These methods look at both tangible and intangible factors to produce a realistic value.

1. Analysing financial statements

An accountant begins by reviewing your accounts, including profit and loss statements, balance sheets, and cash flow reports. This provides a clear picture of your company’s financial health. They look for trends such as consistent revenue growth, profit margins, debt levels, and cash reserves.

Accurate and up-to-date financial records are vital because they form the foundation of any valuation. If your accounts are incomplete, your accountant will help correct and reconcile them before proceeding.

2. Using valuation methods

There are several ways to calculate a business’s value. The most common methods include:

• Asset-based valuation: This method totals all assets owned by the business (such as equipment, property, and stock) and subtracts any liabilities. It works well for asset-heavy industries such as manufacturing.

• Earnings multiple or EBITDA valuation: The accountant applies a multiple to your company’s earnings before interest, tax, depreciation, and amortisation (EBITDA). The multiple depends on industry standards and market conditions.

• Discounted cash flow (DCF): This approach estimates the present value of your business’s future cash flow, adjusted for risk and inflation.

• Comparable market valuation: Your accountant compares your business with similar companies that have been sold recently to establish a fair market value.

Your accountant will explain which method is most suitable for your business and may use a combination of approaches for a more accurate result.

3. Assessing intangible assets

A business’s value is not only determined by physical assets or profits. Accountants also consider intangible factors that contribute to long-term success, such as:

• Brand reputation and customer loyalty.

• Contracts, patents, or intellectual property.

• Management strength and employee expertise.

• Market position and potential for future growth.

These elements can significantly increase your company’s overall value, particularly in service-based or technology sectors.

4. Adjusting for one-off factors

Accountants identify and adjust for any one-off or non-recurring items in your accounts that could distort profitability. For example, a large one-time expense or an unusually high income year might not reflect normal trading conditions. By adjusting for these factors, your accountant ensures the valuation is realistic and sustainable.

5. Reviewing market conditions

An accountant considers the wider market when valuing your business. They assess industry performance, demand trends, and competitor activity. A company in a growing sector may command a higher valuation than one in a declining market, even with similar financial results.

6. Forecasting future performance

Valuation is as much about future potential as it is about past performance. Accountants can project your future cash flow, profitability, and return on investment using financial forecasting models. This helps investors or buyers understand your business’s long-term prospects and justifies your asking price.

Benefits of using an accountant for business valuation

Professional accuracy

An accountant ensures that your business valuation is based on verified data, not assumptions. This makes the figure credible to banks, investors, or buyers and can help you negotiate from a position of strength.

Objectivity and independence

When valuing your own business, emotions can cloud judgment. Accountants provide an impartial assessment, free from bias, ensuring the valuation reflects market reality rather than personal expectations.

Tax efficiency

Accountants understand how valuations affect tax obligations, such as Capital Gains Tax, Inheritance Tax, or Stamp Duty. They can structure the valuation and subsequent transactions to minimise tax liabilities.

Stronger negotiation power

A professionally prepared valuation gives you evidence to support your asking price when negotiating with potential buyers or investors. This reduces the risk of undervaluing or overvaluing your business.

Compliance and transparency

Accountants ensure your valuation complies with accounting standards and HMRC requirements. This is particularly important when valuing a business for sale, merger, or shareholder purposes.

Example in practice

A family-owned construction company wanted to bring in an external investor. The owners asked their accountant to value the business. After reviewing three years of accounts and adjusting for exceptional costs, the accountant used an earnings multiple approach and determined the company was worth £850,000.

This valuation helped the owners negotiate a 25% equity sale at a fair price and secure funding for expansion. The accountant also advised on the tax implications of the transaction and ensured all reporting was completed correctly.

How to prepare for a business valuation

To get the most accurate valuation, your accountant will need detailed financial information. You should prepare:

• Recent financial statements and management accounts.

• A list of business assets and liabilities.

• Forecasts and budgets for future trading.

• Contracts, customer lists, and key supplier agreements.

• Details of intellectual property or brand assets.

Having this information ready helps your accountant complete the valuation more quickly and efficiently.

Conclusion

An accountant can help you value your business accurately by analysing financial data, assessing assets, and considering market conditions. Their expertise ensures that the valuation is realistic, credible, and supported by evidence.

Whether you are planning to sell, attract investors, or plan for the future, working with an accountant gives you a clear understanding of your business’s true worth. This insight allows you to make informed decisions that protect your interests and strengthen your financial position.