This is a question many business owners want answering. The truth is, it depends on a range of factors and any valuation is only useful as a guide for planning forward. The ultimate value of a business is the price a willing buyer is prepared to pay for it.
The prevailing economic climate and state of the business’ sector can affect company valuation for better or worse, as can your reasons for selling. If you need a fast sale due to ill health, for instance, the value may be lower than if a sale was taking place under more favourable circumstances.
Valuing a business is a complex process and we can support you throughout.
So, what are the most common methods of valuing a business?
Price to earnings ratio (P/E)
The price to earnings ratio uses multiples of profit, so may be an appropriate valuation method if you own a well-established business with a good track record of profits. ‘Price’ refers to the company’s current share price, and ‘earnings’ to the earnings per share (EPS). The P/E ratio indicates the business’s expected growth in earnings per share in the future.
Discounted cash flow
Discounted cash flow relies on estimating future cash flows for the company, and a residual business value, and may be suited to businesses with few assets.
Entry cost
Entry cost valuation involves calculating how much it would cost to build your business to the stage that it’s reached now, including start up and recruitment costs, marketing, and the value of assets. Any savings that could have been made should then be deducted to arrive at the valuation.
Asset valuation
The asset valuation method may be suitable if your business is well established and owns high levels of tangible assets. The Net Book Value (NBV) of assets is calculated, and then adjusted to take account of external factors such as depreciation and inflation.
Valuation based on industry
Some businesses are valued based on the industry in which they operate. The retail industry is one such example, where the number of outlets is an essential element for consideration. Industry ‘rules of thumb’ use factors specific to an industry and can provide a more accurate calculation in some cases.
Other considerations when valuing your business
Intangible assets are a key factor when valuing a business. Intellectual property, goodwill, business reputation, and even a premium business location, can all add considerable value in the eyes of potential purchasers.
Spotlighting these intangible assets also allows you to improve their value where appropriate – for example, registering ownership of a trademark or patent, building up their reputation even further, or improving the condition of premises.
Please talk to us about valuing your business as this can lead to a range of important considerations and actions.
There are less than 90 days to go until the deadline for filing your Self-Assessment return online.
You need to file your return by 31 January 2024. Filing your return early is an option and means you can find out how much you owe and help you budget and plan for your payment. If you are due a refund, you can claim it back sooner.
If you’ve already sent HMRC your return and paid, you don’t need to do anything else.
If you think you are no longer required to complete a Self-Assessment return, you can 'Check if you need to send a Self-Assessment tax return'.
If you no longer need to complete a Self-Assessment return, tell HMRC at, 'If you no longer need to send a tax return' or find more help on their YouTube channel.
If you need assistance in completing your tax return please contact us ahead of the deadline and we will do our best to make sure it’s accurate and filed on time.
HM Revenue and Customs (HMRC) is reminding working families to give their childcare budget a boost by opening a Tax-Free Childcare account.
Parents can use Tax-Free Childcare to help with childcare costs for school holiday clubs, breakfast or after school clubs, childminders or nurseries.
You can get up to £500 every 3 months (up to £2,000 a year) for each of your children to help with the costs of childcare. This goes up to £1,000 every 3 months if a child is disabled (up to £4,000 a year).
If you get Tax-Free Childcare, you will have to set up an online childcare account for your child. For every £8 you pay into this account, the government will pay in £2 to use to pay your provider.
You can get Tax-Free Childcare at the same time as 30 hours free childcare if you’re eligible for both.
You can use it to pay for approved childcare, for example:
Your childcare provider must be signed up to the scheme before you can pay them and benefit from Tax-Free Childcare. Check with your provider to see if they’re signed up.
If your child is disabled
You can use the extra Tax-Free Childcare money you get to help pay for extra hours of childcare. You can also use it to help pay your childcare provider so they can get specialist equipment for your child, such as mobility aids. Talk to them about what equipment your child can get.
See: Save up to £2,000 a year on childcare costs for your little pumpkins - GOV.UK (www.gov.uk)
The National Protective Security Authority (NPSA), part of MI5, and the National Cyber Security Agency (NCSC) have launched a new awareness campaign to encourage the UK's emerging tech sector to protect and secure their innovations.
The campaign consists of an updated suite of Secure Innovation guidance that offers best practice advice on keeping ideas safe.
A free Quick Start Guide is available to help those without extensive security expertise take the first steps towards protecting their innovations. The advice centres around three key steps:
Beyond this Quick Start guide, the Secure Innovation website hosts more detailed advisories for businesses and investors, suggesting ways to bolster their protections against criminal and other threats. This guidance is for innovative UK companies of all sizes. Those with low levels of security are most at risk.
The guidance warns that no company is too small or too young to be a target, especially when working in emerging technologies. Potential threats include:
Businesses are advised to take state and criminal threats seriously, ensuring they effectively manage the risks, including those emanating from cyberspace.
By accessing the Secure Innovation portal, businesses can get security advice that will help them:
See: Guidance for the emerging technology sector | NPSA
Up to £100,000 is available for tech solution providers to address critical supply chain challenges across textiles, farming, hydrogen, food and automotive sectors.
