You don’t need a precise, accountant-signed figure at this early stage. What you need is a ballpark estimate. A realistic sense of whether selling your business could pay off your mortgage, fund retirement and give you the security to move on. Having this clarity up front helps avoid the risk of spending thousands on professional fees only to discover later that a sale isn’t financially viable for you.
How much could an EOT pay for my company?
Why an approximate business valuation matters
A rough valuation isn’t about precision, it’s about direction. If your indicative figure shows that the potential proceeds wouldn’t cover your financial needs, you may need to delay your exit or explore other income sources. Conversely, if even a conservative estimate suggests you could be debt-free and financially comfortable, it might give you the confidence to start conversations about succession sooner rather than later.
Common business valuation approaches
At a high level, business valuations often use the following methods:
- Multiple of profits (EBITDA): A common shorthand is to take your sustainable annual profit (before interest, tax, depreciation, and amortisation) and multiply it by an industry-standard multiple. For SMEs, this is often between 3x and 4x, though it can vary.
- Asset-based valuation: For asset-heavy businesses (e.g. property, manufacturing), the value of physical assets plays a larger role.
- Revenue multiples: In sectors like SaaS, agencies, or recurring income businesses, buyers may also look at revenue multiples, particularly where profit is currently reinvested into growth.
Learn more about how we calculate our valuations.
Key factors that influence your business’ value
Even before approaching a professional adviser, you can reflect on the factors that may push your valuation up or down:
- Sustainability of profit: One-off wins are less valuable than steady, recurring earnings.
- Client concentration: A business reliant on one or two key customers is riskier (and therefore less valuable).
- Market sector: Some industries command higher multiples than others.
- Systems and management: The less dependent the business is on you personally, the more transferable its value.
- Growth potential: Buyers and trusts alike value businesses with room to expand.
The “advanced” section of our valuation tool considers these factors.
Linking the valuation to your personal goals
Once you’ve sketched an approximate value, the next step is to compare it with your personal financial goals:
- Would this figure clear any debts?
- Would it fund your retirement plans?
- Are there any big personal costs on the horizon?
- Would you need to keep working part-time or build other income streams?
Being realistic now saves heartache later. A mismatch doesn’t mean your business has no value, it just means you may need to adjust timing or expectations.
Beware of vanity valuations
It’s natural to hope your business is worth more than the market will realistically pay. But relying on an inflated figure is dangerous. You could spend years pursuing an exit that never delivers. Aim for realism: better to be pleasantly surprised later than disappointed after investing time and fees.
Learn more about these consequences on our EOT myths page.
When to seek professional input
A rough calculation is fine for early planning, but if selling to an EOT, before committing to any deal, you’ll need a formal, independent valuation. The key is timing – use your rough estimate to check whether pursuing a sale makes sense, then bring in professionals once you’re confident it’s viable.
Conclusion
Working out an approximate valuation of your business early can help you make informed decisions without wasting money on unnecessary fees. Take a pragmatic view, use profit multiples and a few key adjustments to sketch a sensible figure. Compare it against your financial goals. If the numbers line up, you can move forward with confidence. If not, you can focus on growing value before pursuing an exit. Either way, you’ll be in control of your journey.