Is my broker's valuation accurate? How to check the figure you've been given
Most UK business owners first hear what their company is "worth" from a broker, free of charge, often within a few days of a first phone call. Most buyers first hear it from the same document. It is the single most consequential number in the transaction, and it is almost never accompanied by workings. This guide explains how those figures are produced, where they go wrong in both directions, and the eight things to test before you rely on one.
The short answer
A broker's valuation is a marketing appraisal, not an independent valuation. It is produced free because it wins instructions, and the broker is paid a percentage of a completed sale. That structure pulls the figure high at the pitch stage and low once the business has sat unsold. Some brokers price very well. But if the number is driving a decision you cannot reverse — signing a sole agency agreement, setting an asking price, or making an offer — test it independently.
Why free appraisals drift high at the start
When three brokers pitch for the same instruction, the owner usually appoints the one who quoted the highest figure. Every broker knows this. Over time the market selects for optimism, and the correction arrives later in the form of price reductions once the listing has gone stale. A business marketed 30% above its defensible value doesn't sell 30% higher — it sits, and a stale listing sells for less than a correctly priced one ever would have.
And why they drift low at the end
Six or nine months in, the incentive reverses. A completed sale at a reduced price pays the broker; a perfect price that never completes pays nothing. The pressure to "be realistic" arrives precisely when the seller is most tired and least able to judge whether the reduction is genuinely justified by market feedback or simply convenient. An independent figure obtained before you go to market is the only way to tell those apart.
Eight things to test in any broker valuation
1. The add-backs. Every adjustment to reported profit should be listed and justified. Legitimate: excess owner remuneration above the market cost of a replacement manager, genuinely one-off legal or restructuring costs, personal motoring, non-working family salaries. Not legitimate: costs the buyer will still incur, deferred maintenance, and speculative "efficiencies" a new owner could theoretically make.
2. Whether the earnings base is sustainable. A single strong year is not maintainable earnings. Check whether the appraisal uses a weighted average, why the weighting was chosen, and whether an unusual year — a one-off contract, a post-pandemic catch-up, a price rise that has since been competed away — is doing the heavy lifting.
3. Where the multiple came from. "Businesses in your sector sell for 4x" is not evidence. Ask which completed transactions support it, of what size, in what year. Asking prices are not evidence of value; completed deals are. Multiples also scale with size — a £300k EBITDA business does not earn the multiple a £3m EBITDA business does.
4. Owner-dependence. If the business needs the owner to win work, price jobs, or hold the key relationships, a buyer discounts hard — or structures the price into an earn-out. Many appraisals nod at this and then apply a full going-concern multiple anyway.
5. Customer and supplier concentration. One customer at 40% of revenue is a valuation issue, not a footnote. So is an exclusive supply arrangement that a new owner cannot assume.
6. Net debt, cash and surplus assets. An enterprise value is not what the seller receives. Debt, hire purchase, director's loans, deferred tax and surplus property all sit between the headline and the money in the bank. Confirm the appraisal states which basis it is on.
7. Working capital. Buyers expect a normal level of working capital to transfer with the business. If the definition is left vague until heads of terms, the "agreed" price can move by six figures during diligence.
8. Property and lease terms. A freehold is valued separately and can exceed the trading value. For leaseholds, a short remaining term with no security of tenure directly suppresses the multiple.
If you're the buyer
The same eight tests apply, read in the other direction. The information memorandum is a sales document; adjusted EBITDA in an IM is usually the most flattering defensible version of profit. Rebuild it yourself from the statutory accounts and management figures before you anchor on the seller's number, and price the risks — concentration, owner-dependence, capex overhang, staff retention — explicitly rather than as a vague discount. An independent valuation before heads of terms is far cheaper than discovering the problem in diligence, and gives you something objective to negotiate with.
When a second opinion is worth it
Where the figure is material, an independent written valuation costs a fixed fee — typically £495 — against a business usually worth six or seven figures. Confirmation is as valuable as correction: if the broker's number holds up, you now have a document with workings to hold the line when the pressure to reduce arrives.
The distinguishing feature is the absence of a stake in the outcome. We charge a fixed fee, take nothing from any transaction, and don't sell businesses. Having spent over a decade as a broker before founding The Business Valuers, we read these appraisals from the inside — we know exactly which assumptions are load-bearing. See how a broker valuation check works.
Common questions
Are business broker valuations accurate?
Sometimes. They are marketing appraisals produced by someone paid on completion, and they rarely show workings — so treat them as a starting point, not a conclusion.
Why are free business valuations usually too high?
Because the highest quote tends to win the instruction. The market selects for optimism, and the correction comes later as price reductions.
How much should a second opinion cost?
An independent written valuation for a UK SME typically runs £495 to £3,000 depending on scope. Ours is a fixed fee, typically £495, delivered in 72 hours. Where you go on to sell through a broker we introduce or work alongside, that fee is frequently absorbed or credited against their commission at completion.
What add-backs are legitimate?
Genuinely non-recurring or owner-specific costs. Anything a buyer will still have to pay is not an add-back, however it's presented.
Will getting a second opinion annoy my broker?
A good broker welcomes it — an independently supported asking price is easier to defend with buyers. A broker who resists any scrutiny of their own figure has told you something useful.
The Business Valuers provides independent, fixed-fee valuations for UK SMEs. We are not a broker and take no commission on any transaction. This article is general guidance, not advice on any specific business.
Related: Broker valuation check · How to choose a business broker in the UK