What a business valuation report contains

1. Independence, stated before anything else

The first page after the contents is not the valuation. It is the statement of role. In the sample it reads:

“The Business Valuers is engaged for a fixed fee that does not depend on the valuation reached or on the outcome of the settlement. We have no financial interest in the company and no relationship with either party beyond this engagement. Our opinion is independent and impartial.”

It also says plainly that value is a matter of opinion, not fact, and that a different valuer could reasonably reach a different figure. A report that claims certainty is a report that has not been tested by anyone.

The same section defines four terms in plain English — EBITDA, multiple, enterprise value, equity value — because the people reading a valuation are usually owners and solicitors, not accountants.

2. The executive summary: the whole answer on one page

Eight figures carry the report. Revenue of £1,612,057. Reported EBITDA of £234,056. Adjusted maintainable EBITDA of £187,000. A supported multiple range of 3.25x to 3.75x. An enterprise value of £608,000 to £701,000. Machinery finance of £46,300 to settle. Cash of £84,650. Equity value of £646,000 to £740,000.

3. Adjusted maintainable earnings — the section that decides the answer

A buyer, or a court, values the profit a business can sustainably earn under normal ownership, not the profit as reported after owner-specific choices. In the sample there are three adjustments, each shown with its reasoning:

Why the owner's salary is added back and then a bigger cost deducted. The owner draws £12,000 of salary and around £110,000 of dividends. Dividends are paid from profit after tax, below the EBITDA line, so only the salary needs adding back. What a buyer must actually pay for is the role he performs. Production and installation are already run by employed managers, so the role to replace is commercial leadership: winning and pricing work and holding the key customer relationships. That is benchmarked as a general manager with sales responsibility in the South West at £62,000 to £74,000 fully loaded, and £68,000 is adopted.

No double-counting. The report states explicitly that the owner-held customer relationships are priced once, as a full replacement cost, and weighed again only as concentration risk in the multiple — not as owner dependency twice over. Charging both a full replacement cost and a heavily discounted multiple for the same fact would count it twice.

No aggressive add-backs. Marketing, vehicle and travel costs are genuine trading costs and stay in. Two vans used by the installation team are retained. No adjustment is made for modest home-office costs. Where a report adds back everything it can, the first buyer or opposing expert who reads it will strip the additions out and the credibility of the whole document goes with them.

4. The multiple, anchored to completed deals

Completed UK transactions in joinery, fit-out and specialist construction products at this size cluster between 2.5x and 4.5x adjusted EBITDA, with the average around 3.3x for owner-managed businesses at this profit level, drawn from Dealsuite, MarktoMarket and GS Verde data. Manufacturers command more than pure installers because plant, premises and a trained workforce transfer with the business. Completed deals, not asking prices, are the evidence a report should anchor on.

The report then adopts 3.25x low, 3.5x central and 3.75x high, and explains the choice: the central case sits just above the completed-deal average because this is a better-invested and better-managed business than the typical workshop of its size, held there rather than higher by customer concentration and a project-based order book.

5. The bridge from enterprise value to equity value

This is the step most owners have never been shown. The multiple gives the value of the trading business. What the shares are worth is that figure less debt to be settled, plus surplus cash.

The bridge here is short because the balance sheet is clean: one finance agreement, normal working capital, no other borrowings and no director's loan. A buyer would still complete on a cash-free, debt-free basis with a normal level of working capital, so the amount actually paid on the day moves with the balance sheet on the day.

6. Sensitivity — showing where the answer can move

A single number invites argument. A grid shows the reader exactly how much the two contested inputs — earnings and multiple — move the conclusion.

7. Testing the answer two other ways

Earnings govern, because the business is worth substantially more as a trading company than the sum of its plant and stock. But the report cross-checks. Priced on revenue at the 0.35x to 0.5x seen in completed UK joinery and fit-out transactions, the implied equity value is roughly £564,000 to £806,000 — a range that comfortably brackets the conclusion. Priced on assets, book net assets of £212,400 sit far below the earnings basis, and the difference of about £480,000 at the central case is goodwill: the trading record, the team, the order book and the customer base. Net assets are a floor, not the measure.

8. Basis, assumptions and limitations

The closing section is the one that makes the report usable by a third party. It states the basis of value (market value of 100% of the equity as a going concern, hypothetical willing buyer and willing seller, at a stated date); the purpose; the information relied on (filed accounts, management accounts, the lender's settlement statement, bank statements and written answers from the owner, reviewed for reasonableness but not audited); the key assumptions; and — just as importantly — what was not done: no due diligence, no site visit, no plant and machinery valuation, no contract-by-contract review.

Where the purpose is matrimonial, the report also addresses liquidity (a private company's value is not cash in hand) and the no gain, no loss treatment of share transfers between spouses under a formal divorce agreement or court order — flagging them as matters for the parties' legal advisers rather than for the valuer.

Reading any valuation report: six tests

1. Is the valuer's fee independent of the figure reached? If not, stop there.
2. Can you trace reported EBITDA back to a filed set of accounts?
3. Is every normalisation adjustment itemised with a reason, or is there a single unexplained “adjusted profit” line?
4. Is the multiple supported by completed transactions, or by asking prices and rules of thumb?
5. Is there a bridge from enterprise value to equity value showing debt and cash?
6. Does the report say what it did not do, and state its assumptions?

A report that fails tests three to five will not survive contact with a buyer's adviser, an opposing solicitor or HMRC. That is the whole difference between a number and a valuation.

Common questions

What does a business valuation report contain?

A complete UK business valuation report contains: a statement of the valuer's role and independence; an executive summary with the headline figures; a business overview covering ownership, customers and premises; the financial performance history; adjusted maintainable earnings with every adjustment itemised; market and completed-transaction evidence supporting the multiple; the valuation itself, including the bridge from enterprise value to equity value and a sensitivity table; the basis, assumptions and limitations; and the author's credentials.

How long is a business valuation report?

Our reports run to roughly 11 to 40 pages depending on complexity. Length matters far less than whether each figure is traceable: a reader should be able to see where reported EBITDA came from, what was added back and why, what multiple was applied and what evidence supports it.

What are adjusted maintainable earnings?

Adjusted maintainable earnings are the profits a business can sustainably earn under normal ownership, rather than profits as reported after owner-specific choices. In the sample report, reported EBITDA of £234,056 is adjusted by adding back the owner's £12,000 salary, deducting a £68,000 market-rate cost of replacing his role, and adding back an £8,900 one-off uninsured flood repair, giving £187,000 of adjusted maintainable EBITDA.

How is the valuation multiple justified in a report?

The multiple must be anchored to completed UK transactions, not asking prices. In the sample, completed joinery and fit-out deals at this size cluster between 2.5x and 4.5x adjusted EBITDA with an average around 3.3x. The report then lists the specific factors that push this business above or below that average, and adopts 3.25x to 3.75x with a 3.5x central case.

What is the difference between enterprise value and equity value?

Enterprise value is the value of the trading business itself — adjusted earnings multiplied by the multiple. Equity value is what the shares are worth: enterprise value less debt to be settled, plus surplus cash. In the sample, a central enterprise value of £654,500 less a £46,300 hire-purchase settlement plus £84,650 of cash gives an equity value of £693,000.

Does a valuation report show a single figure or a range?

Both. Value is a matter of opinion rather than fact, so a credible report states a range with a central case, and shows a sensitivity table setting out how the answer moves if earnings or the multiple move. The sample concludes at £646,000 to £740,000, central £693,000.

Can a valuation report be used in divorce proceedings?

An indicative report of this kind is prepared for negotiation and settlement and can be relied on by both parties where the instruction is a joint one. It is not a CPR Part 35 expert report, but it is written to a standard capable of being developed into a Single Joint Expert report if proceedings require it.

© The Business Valuers. This walkthrough is published for the benefit of business owners and their advisers. No licence is granted to reproduce the report format or to hold out this methodology as your own.