What is my business worth?

Every owner has a number in their head. It is usually wrong, and usually too high, because it is built on turnover and effort rather than on what a buyer will actually pay for. This page is how to think about the real figure before you pay a professional to calculate it.

What decides what a business is worth?

Most owner-led businesses are valued the same way: transferable profit multiplied by a figure the buyer sets. Two numbers, and both matter.

Transferable profit is the profit that continues after you leave. Start with your net profit, then adjust it. Add back the things a new owner would not carry, like an inflated owner’s salary, your car through the business, or genuine one-off costs. Take off anything the accounts are flattering, like work you do unpaid that a buyer would have to hire for. What is left is the profit a buyer can actually expect to keep. It is often lower than the headline figure, which is why owners and buyers argue about it.

The multiple is the number of years of that profit a buyer will pay up front. It is not fixed and it is not a formula. It is a judgement about risk. The safer and more predictable the profit looks, the higher the multiple. The more the business leans on you, one customer, or a lucky run, the lower it goes. Sector matters too: buyers pay more for recurring, contracted income than for project work that restarts at zero.

I am not going to quote you a multiple as if it were a market fact, because anyone who does without seeing your accounts is guessing. What holds across the board is the logic. Worth equals transferable profit times a multiple, and almost everything you do to the business moves one of those two numbers.

What raises the multiple?

Four things do most of the lifting, and none of them is a trick. They are the same qualities that make a business calmer to own.

Owner independence. The business runs a normal month without you in it. Decisions get made, customers stay, the work ships. This is the single biggest lever, because a buyer is purchasing the future, and if the future needs you, there is nothing to buy.

Recurring or repeat revenue. Income that arrives again next month without being re-won is worth far more than income you chase from scratch. Contracts, retainers, service plans and repeat orders all tell a buyer the profit is likely to still be there after completion.

Clean numbers. Accounts that are current, reconciled, and free of personal spending let a buyer trust the figures. When the numbers need explaining, a buyer assumes the worst and prices for it, or walks. Trust is what a sale runs on.

A team that stays. Clear roles, real authority, and key people who are tied in and likely to remain. A buyer wants to meet a management team, not just the owner who does everything.

Get those four right and you lift the multiple and the profit at the same time, because the same qualities usually grow the business as well.

What owner dependence costs at sale

Owner dependence is the most expensive habit in a small business, and you only find out how expensive when you try to sell.

If clients buy from you personally, if you sign everything, if the key relationships and know-how live in your head, then a buyer is not looking at a business that runs. They are looking at a job with you still in it. They price that two ways, and both hurt. The multiple drops, because the risk is high. And a large slice of the money gets held back into an earn-out, so you stay on for years after the sale to hand it all over, with the final payment depending on the business surviving your exit.

The owner holiday test is the quick version of what a buyer’s due diligence will find. If two weeks fully offline would break the business, a buyer sees the same fragility you have been living with, and pays accordingly. Making the business sellable and making it a good business to own are the same work.

Can you value your own business?

You can estimate, and you should, because the estimate tells you where to put your effort. Work out your transferable profit honestly, look at what similar businesses in your sector change hands for, and be conservative on the multiple. That gives you a working figure and, more useful, a list of what is holding it down. The free business plan takes seven questions and gives you a clearer read on the profit figure any valuation starts from.

What you cannot do from the kitchen table is produce the number a buyer will actually pay. That comes from a proper valuation, and when a real transaction is on the table you want an accountant or a corporate finance adviser who knows your sector, not a rule of thumb off a website. Take the professional advice before you sign anything. This page is for thinking, not for pricing a deal.

If you want a straight read on where the business stands today, across the areas a buyer cares about, the CoreOS Scorecard takes a few minutes and scores how dependent the business is on you. And if the honest answer is that the value is capped because everything still runs through you, that is the work. Momentum is a monthly one-to-one coaching partnership built to make an owner-led business run, and therefore sell, without its owner. It is application only, and the application is a 30-minute call with no charge and no pitch.