How can an accountant help me value my business?

At Towerstone Accountants we provide specialist small business accountancy services for owners, directors, and growing businesses across the UK. We created this webpage for small business owners who want clear guidance on managing finances, meeting tax obligations, and making informed decisions without jargon. Our aim is to help you stay compliant, improve cash flow, and build a more resilient business.

Business valuation is one of those topics that many business owners assume only matters when they are ready to sell. In reality, understanding the value of your business is useful at many stages, whether you are planning for growth, considering bringing in a partner, looking to raise finance, thinking about succession or simply wanting to understand what you have built. From my experience as an accountant, valuation is as much about clarity and planning as it is about price.

Many business owners have a rough figure in mind based on turnover, profit or years of hard work. That figure is often emotional and understandable, but it is rarely how buyers, investors or lenders think. An accountant’s role is to bridge that gap, translating your business into a financial story that stands up to scrutiny and reflects its true commercial value.

In this article, I want to explain in depth how an accountant can help you value your business, what valuation actually involves, which methods are commonly used in the UK and how this process can support better decision making long before any sale takes place.

Why business valuation matters even if you are not selling

One of the biggest misconceptions around valuation is that it is only relevant at the point of exit. In practice, valuation is useful in many situations.

Understanding the value of your business can help when:

• You are planning long term growth or investment

• You want to bring in a business partner or investor

• You are considering selling part of the business

• You are planning succession or retirement

• You are negotiating with lenders or investors

• You want to benchmark progress year on year

Valuation gives you a reference point. It helps answer the question, if I stepped away today, what would this business actually be worth to someone else.

What business valuation really means

Valuing a business is not about arriving at a single definitive number that is universally correct. Value is contextual. It depends on who is buying, why they are buying and the level of risk involved.

From an accounting perspective, valuation is about assessing the future economic benefit of the business and translating that into a figure that reflects risk, sustainability and potential return.

This is why two buyers can value the same business differently. An accountant helps establish a realistic and defensible range, rather than an inflated or arbitrary figure.

The accountant’s role in business valuation

An accountant brings structure, objectivity and technical understanding to the valuation process. While business owners understandably focus on effort and achievement, accountants focus on evidence and future performance.

The key areas where an accountant adds value include:

• Analysing financial performance accurately

• Normalising profits to reflect true earnings

• Choosing appropriate valuation methods

• Identifying strengths and risks that affect value

• Preparing figures that buyers or investors trust

Without this support, many valuations either overstate value or fail to stand up to challenge.

Understanding your financial performance properly

The starting point for any valuation is understanding the business’s financial performance. This goes far beyond looking at turnover or headline profit.

An accountant reviews:

• Profit and loss trends over several years

• Consistency and predictability of income

• Cost structure and margins

• Cash flow generation

• Tax position and compliance

This analysis helps identify whether profits are sustainable or reliant on one off factors. Buyers and investors are far more interested in what the business will earn in the future than what it earned in a single good year.

Normalising profits

One of the most important and often misunderstood parts of valuation is profit normalisation.

Many owner managed businesses have costs that would not apply under new ownership. These might include personal expenses, above market salaries or one off costs.

An accountant adjusts reported profits to remove these distortions and present a clearer picture of underlying performance. This process is critical because valuations are usually based on adjusted profits rather than statutory figures.

Examples of adjustments might include:

• Removing personal expenses run through the business

• Adjusting owner remuneration to market levels

• Excluding one off legal or restructuring costs

• Accounting for exceptional income or expenses

This process must be done carefully and transparently. Over aggressive adjustments undermine credibility and reduce trust.

Choosing the right valuation method

There is no single method that applies to all businesses. An accountant helps select the most appropriate approach based on the type of business, its size and the purpose of the valuation.

Profit multiple valuation

For many small and medium sized businesses in the UK, valuation is based on a multiple of maintainable profits.

The process involves taking adjusted annual profit and applying a multiple that reflects risk and growth potential. That multiple can vary significantly.

Factors that influence the multiple include:

• Stability of earnings

• Customer concentration

• Industry risk

• Dependence on the owner

• Quality of systems and processes

An accountant helps determine a realistic multiple based on market norms and the specific characteristics of your business.

Asset based valuation

In some cases, particularly for asset heavy businesses, valuation focuses on the net value of assets.

This approach looks at what the business owns minus what it owes. It is often relevant for property businesses, manufacturing or situations where profitability is secondary.

An accountant ensures assets and liabilities are valued correctly and that any hidden issues are identified.

Discounted cash flow valuation

For larger or more complex businesses, a discounted cash flow approach may be used. This involves forecasting future cash flows and discounting them to present value.

This method is more technical and relies heavily on assumptions. An accountant helps ensure those assumptions are reasonable and consistent with reality.

While less common for very small businesses, it can be useful where growth potential is significant.

Understanding what drives value in your business

One of the most valuable outcomes of a valuation exercise is understanding what actually drives value in your business.

An accountant helps identify which factors increase or reduce value. These often include:

• Recurring income versus one off sales

• Strength of customer relationships

• Contractual revenue

• Scalability of the business model

• Reliance on key individuals

This insight is useful even if you are years away from selling. It highlights where improvements can have the biggest impact.

Reducing owner dependence

A common issue I see is businesses that rely heavily on the owner. While this may work day to day, it often reduces value.

An accountant can highlight this risk and help you understand how it affects valuation. Reducing owner dependence through systems, delegation and documentation often increases value significantly.

Preparing for buyer or investor scrutiny

Valuation is not just about the number, it is about credibility. Buyers and investors will scrutinise figures closely.

An accountant prepares valuations in a way that stands up to questioning. This includes clear explanations of assumptions, consistent data and transparent adjustments.

This preparation reduces the risk of disputes later and strengthens your negotiating position.

Valuation for different purposes

The purpose of a valuation affects how it is approached.

Valuation for sale

When valuing a business for sale, the focus is on what a buyer is likely to pay. This involves market based assumptions and realistic multiples.

An accountant helps manage expectations and avoid pricing that scares off buyers.

Valuation for investment or partnership

When bringing in an investor or partner, valuation affects ownership percentages. Accuracy and fairness are critical to avoid disputes later.

An accountant ensures the valuation reflects current performance and future potential without favouring one party unfairly.

Valuation for succession or exit planning

For succession planning, valuation helps you understand whether the business can support retirement goals.

This often highlights gaps and gives time to improve value before exit.

Tax considerations in business valuation

Tax plays an important role in valuation and net proceeds.

An accountant considers:

• Capital Gains Tax implications

• Availability of Business Asset Disposal Relief

• Structure of the business

• Timing of a potential sale

Small changes made years in advance can significantly affect after tax outcomes.

How valuation supports strategic decision making

One of the most overlooked benefits of valuation is its role in strategy.

Knowing what your business is worth and why helps you prioritise actions. It turns vague goals into measurable outcomes.

For example, if valuation is limited by customer concentration, you know diversification should be a priority. If margins are weak, pricing or cost control becomes a focus.

Valuation is not a one off exercise

Business valuation should not be a one time event. Value changes as the business evolves.

Regular informal valuations help track progress and ensure decisions align with long term goals. An accountant can help review value periodically and highlight trends.

Common mistakes business owners make about valuation

Some recurring issues I see include:

• Assuming turnover equals value

• Overestimating goodwill without evidence

• Ignoring risk factors

• Treating valuation as purely emotional

An accountant brings balance and realism to the process.

When should you involve an accountant

Ideally, valuation discussions should start well before any transaction.

Involving an accountant early allows time to improve performance, address weaknesses and plan tax efficiently.

Even if you never sell, the clarity gained is valuable.

Final thoughts

An accountant can play a critical role in valuing your business, not just by producing a number, but by helping you understand what that number means and how to influence it.

Valuation is about insight, preparation and informed decision making. It is not about inflating figures or chasing unrealistic expectations.

From my experience, business owners who engage with valuation early feel more in control, make better strategic decisions and are far better prepared when opportunities or challenges arise.

Understanding the value of your business is not about planning an exit, it is about understanding what you are building and how to build it better over time.

You may also find our guidance on Can I sell my small business to someone else and How do I know if my business is profitable useful when exploring related small business questions. For a broader range of practical advice, you can visit our small business guidance hub.