How do you value a sole trader business, partnership or limited company?

Are you wondering how to determine the value of your business or limited company? It’s important to know the value of your business, whether you are selling it, merging with another company, attracting investment or taking on a new partner.

Every business owner or shareholder should know the value of their business. Mybusinessworth.co.uk provide professional, expert written business valuations. It’s quick, straightforward, and affordable to get a proper valuation of your business, whether it be a sole trader business, a partnership, or a limited company.

A proper business valuation is hugely valuable in circumstances such as offering a second opinion for a business that you are purchasing, or if you are considering additional borrowing or investment.

How is a business valued?

Many people assume valuing a business or limited company is a set formulaic approach. They’ve heard terms like ‘asset-based valuation’ where a business is valued principally on its balance sheet. Or ‘income-based valuation’ or ‘profit-earnings valuation’ – methods that look principally at a business’s cash position, profitability and cash flow.

You may have heard terms like EBITDA, earnings before interest, taxes, depreciation, and amortization used to assess profitability in a company’s value.

In practice a formula can only provide part of the overall picture of a business’s value – whether it be a sole trader business, a partnership or a limited company.

The only way to properly establish the value of any business – sole trader or limited company – is to instruct a business valuation professional.

The most useful sort of valuation is a market-based valuation. This method takes account of the whole picture including the company’s accounts, its trading history, its staff, its management team, intellectual property, location, and future potential.

Only after a full and careful analysis can a figure be arrived at that is a credible sale, or open market, valuation.

Sole Traders, Partnerships and Limited Companies

There are some differences in valuing a sole trader or a partnership business versus a limited company. Often a sole trader business can be very simple and a valuation is usually principally
concerned with revenue and profit, assets and the goodwill of the business. Also, sole trader businesses might involve personal liability of the owner, which could influence the valuation.

A limited company valuation can differ in that Directors are often shareholders and paid by way of dividends from profits, perhaps in addition to a salary. This affects the tax position and the sums that can be drawn from the business. A limited company might be larger or more complex and have multiple shareholders and Directors where their role in the business operations might also be a factor.

Please see out other articles including ‘How much is my business worth?’ and our ‘Business Valuations FAQs’

Whatever size or type of business you own, find out its true value today. Most of our professional written business valuations cost just £250+VAT.

Useful Business Valuation Info