Our Approach
Valuation Labs uses an earnings-based methodology commonly used by accountants and business valuers for UK SMEs. We calculate value based on your company's maintainable earnings, adjusted for factors specific to your business.
Earnings Calculation
Weighted Average EBITDA
We use a 3:2:1 weighted average of your EBITDA over three years, giving more weight to recent performance:
- Most recent year: 3x weighting
- Prior year: 2x weighting
- Two years ago: 1x weighting
This approach reflects your current trading while accounting for historical trends and reducing the impact of one-off fluctuations.
Earnings Multiples
We apply an earnings multiple based on your industry, company size, and risk profile. UK SME multiples typically range from:
Earnings Multiple
4x - 6x
Based on EBITDA
Revenue Multiple
0.5x - 1.5x
For comparison purposes
For technology and SaaS businesses with significant recurring revenue, higher multiples may apply (up to 8x recurring revenue) due to predictable income streams.
Adjustments
We make adjustments for factors that affect value:
Directors' Remuneration
We normalise earnings by adjusting owner/director salaries to market rate, as a new owner may pay themselves differently.
Minority Shareholding Discounts
If valuing less than 100% of shares, we apply discounts (10-30%) reflecting reduced control and marketability.
Cash and Debt
Surplus cash is added to value; debt is deducted. Working capital requirements are considered in the base valuation.
Value Drivers
Several factors influence where your multiple sits within the range:
- Growth trajectory - Consistent growth commands higher multiples
- Customer concentration - Diversified customer base reduces risk
- Recurring revenue - Predictable income is valued higher
- Market position - Strong competitive advantages increase value
- Owner dependency - Businesses less reliant on owners are worth more
Important Note
Our valuations are indicative calculations based on the information you provide. They do not constitute formal valuations for legal, tax, or regulatory purposes.
For formal valuations, please engage a qualified professional. See our disclaimer for full details.