Ask what a small business is worth and you will get a multiple. Ask where the multiple comes from and the answers get vague, because for UK SMEs there is no published, official figure to point at — HMRC does not publish one and neither does anybody else with authority.
Start with adjusted profit, not reported profit
A buyer is not interested in what the business earned while paying you an owner's salary and running your car through it. They want to know what it earns for them. So you adjust: add back the excess over a market-rate salary for your role, one-off costs that will not recur, and genuinely personal expenses.
Be honest about it. Aggressive add-backs are the fastest way to lose credibility in a process, and they get found in due diligence.
Why it is a range and not a number
Two businesses with identical profits can be worth very different amounts. What moves them apart is risk to the buyer: how concentrated the customers are, whether the profit survives the owner leaving, how reliable the numbers are, and how much of the revenue recurs.
The single biggest one is you. If the business is really you with a company name attached, a buyer is purchasing a job rather than an asset, and prices it accordingly.
What to do with the answer
Treat it as a sense-check before a conversation, not a valuation. If the number matters — a sale, a share transfer, a divorce, a probate valuation — get a proper one. And if you are twelve to twenty-four months from selling, the useful work is not valuing the business, it is reducing the things that hold the multiple down.
Common questions
Which multiple should I use?
There is no correct answer we can give you honestly, which is why this calculator asks rather than assumes. Multiples vary by sector, size, growth and how much of the revenue is contracted, and the figures quoted in the trade press are market opinion rather than published data. If you want a defensible range, a broker or corporate finance adviser who transacts in your sector regularly will have real comparables, and that is worth more than any calculator.
Is turnover ever used instead of profit?
Yes, in sectors where recurring revenue transfers reliably — accountancy practices are the classic example, valued on a multiple of gross recurring fees. It works there because the fees repeat and the client relationships are the asset. For most trading businesses profit is the better basis, because turnover tells a buyer nothing about whether the business makes money.
What lowers a valuation most?
Customer concentration and owner dependence, by a distance. If one client is a large share of revenue, a buyer prices the risk that they leave. If the business cannot run without you, there is less to buy. Both are fixable, but not quickly — which is the argument for starting two years before you want to sell rather than two months.