As we embark on the new year, naturally, many of us will start to think about our goals for the next 12 months. It is often seen as a chance to redress our work-life balance, in an attempt to avoid the sleepless nights, long working days, missed family occasions and the many other sacrifices you’ve undoubtedly made as a business owner throughout 2018. If this strikes a chord with you, could 2019 be the year to realise your lifetime’s investment?
What is your business worth?
Everyone knows the value of their house, their car, their pension, but how many take advice on the value or marketability of their business?
Armstrong Watson are a member of the UK200Group, the UK’s leading association of independent chartered accountants and law firms, representing a significant group of trusted, quality-assured business advisers offering strategic business services to the SME sector. Every year, each member of the Corporate Finance panel provides key data on actual transactions, involving the purchase or sale of real UK businesses each year. Every November, the findings are reported and make an interesting reading for anyone looking selling their business in the near future.
This year, the results as published in the SME Valuation Index, shows that the average deal size was £4.4 million, after dropping in 2017 to £3.4 million from a five year high of £5.7 million in 2016. However, perhaps the most interesting statistic is that the median EBITDA multiple was 5.5 (the multiple applied to earnings before interest, tax, depreciation and amortisation, excluding any outliers), the highest it has been in the last five years. There are of course many other factors that influence the value of your business but the Valuation Index clearly evidences there is demand out there for good quality, owner-managed businesses.
Even if selling your business might seem some time off, with Brexit on the horizon, it could be more pertinent than ever to know your business’s worth. Whilst it is proven that those who start to plan their exit at least one to two years in advance are more likely to reach a successful completion, those who plan their exit more than three years in advance, have a better chance of achieving a higher valuation. Planning ahead and seeking the right advice now will enable you to proactively manage any changes in the marketplace as well as giving you the opportunity to identify and make improvements that could significantly increase your exit value.
If you would like to know what your business is worth now, how much it could be worth in the future, or what you need to do to increase the value of your business, please contact Darcie Rae, corporate finance manager on 01228 690200.Contact Darcie
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