How to Value Your Business — 6 Methods Explained

"How much is my business worth?" It is one of the most important questions a business owner can ask — and one of the hardest to answer without spending thousands. A formal valuation from a corporate finance firm typically costs five to fifty thousand pounds, takes weeks, and requires extensive data gathering. A quick desktop valuation from an accountant still runs into the low thousands and takes days.

The truth is, there is no single "correct" way to value a business. Different methods suit different types of businesses, and professionals typically run several approaches to triangulate a realistic range. Below, we explain the six most widely used methods, what each one is best for, and how they work. We also built a free tool that runs all six simultaneously from your existing accounting data — no spreadsheets, no consultants, results in seconds.

The six valuation methods (and when to use each)

The module runs six established valuation methodologies and blends them into a weighted composite with confidence intervals:

The composite weighting adjusts by sector. A SaaS company weights 30% toward DCF and 25% toward revenue multiples. A professional services firm weights 35% DCF and 20% EBITDA. The system detects the sector from your chart of accounts and applies the appropriate profile automatically.

Monte Carlo: 10,000 scenarios, not one guess

A single point estimate is dangerous. Say the DCF returns an enterprise value of two and a half million. What if WACC is half a point higher? What if growth slows by two percent? What if the terminal growth assumption is optimistic?

The Monte Carlo simulation runs 10,000 iterations, each time randomly varying WACC, revenue growth rate, and terminal growth assumptions within realistic bands. The output is a probability distribution: the 10th percentile (pessimistic), 25th, median, 75th, and 90th percentile (optimistic). Instead of a single number you get a range and a confidence level.

This is the same statistical technique used by investment banks in M&A models. The difference is they charge six figures for it and take months. This runs in seconds from the same GL export you already have.

Sensitivity analysis: what moves the needle

The tornado chart shows which variables have the biggest impact on valuation when changed by plus or minus twenty percent. For most businesses the answer is WACC and revenue growth. But occasionally it surfaces something unexpected: a business where working capital changes dominate, or where the terminal growth assumption swings the number more than the discount rate.

Alongside the tornado is a radar chart showing how closely the six methods agree. Tight convergence means high confidence in the composite value. Wide spread means the business characteristics create different pictures depending on the lens and that warrants deeper investigation.

Exit readiness: the 12 dimensions that buyers care about

Valuation tells you what a business is worth on paper. Exit readiness tells you whether anyone will actually pay that price. The module scores twelve dimensions, each weighted by importance:

1. Revenue growth (12%) — Year-on-year trajectory
2. Revenue predictability (10%) — Coefficient of variation; buyers pay premiums for consistency
3. Gross margin stability (10%) — Are margins holding or eroding?
4. Operating leverage (8%) — Operating margin strength
5. Working capital efficiency (8%) — Current ratio health
6. Cash generation quality (10%) — Operating cash flow relative to revenue
7. Debt and leverage health (8%) — Debt-to-equity ratio; target below 1.5
8. Expense discipline (7%) — Profit margin trend direction
9. Profit trend (10%) — Net margin trajectory year over year
10. Revenue diversification (7%) — Number of distinct income streams
11. Capital expenditure profile (5%) — Capital intensity relative to revenue
12. Data integrity (5%) — Benford's Law analysis on GL transactions

The composite produces a score from 0 to 100 and a letter grade. An A (80+) means highly acquisition-ready. A C (50-64) means fair but with identifiable gaps to address. The breakdown shows exactly which dimensions are dragging the score down and what to fix.

Where the data comes from

Everything is derived from the general ledger. No manual inputs are required to run a valuation, though the enrichment prompt lets you refine the result with owner compensation, add-back selections, industry sector, tax rate overrides, and custom multiples.

The module auto-detects owner compensation by searching for director salary, owner draw, and similar GL categories. It identifies add-back candidates (one-off expenses, personal costs, entertaining, donations) and scores their confidence. It detects the industry sector from account naming patterns. You review and adjust, but the heavy lifting is done.

WACC is pulled from the Capital Structure Optimisation module if available, with a sensible fallback. Free cash flow is calculated from EBITDA, tax, estimated capex (depreciation as a proxy), and working capital movements. Growth rate comes from a linear regression on monthly revenue with at least six months of data.

Who this is for

Accountants advising on exit or succession. Your client asks what their business is worth. Instead of referring them to a corporate finance firm or hand-building a spreadsheet model, you upload their GL and have a six-method valuation with Monte Carlo confidence bands in front of them in minutes. The exit readiness score gives you a roadmap of what to fix before going to market.

Business owners exploring a sale. You get a realistic, multi-method view of what your business is worth before spending money on formal valuations. The sensitivity analysis shows which improvements would move the number most.

M&A advisors doing initial screening. Run a quick desktop valuation from the target's GL to assess whether the deal is in the right ballpark before committing to full due diligence.

Lenders and investors. The exit readiness score and Monte Carlo distribution give a risk-adjusted view that goes beyond a single earnings multiple.

What this replaces

A formal business valuation engagement from a corporate finance firm typically costs five to fifty thousand pounds depending on complexity, takes two to eight weeks, and requires extensive data gathering. An informal desktop valuation from an accountant costs one to three thousand and still takes days of spreadsheet work.

This module runs in seconds, uses data you already have, and produces a more comprehensive output than most desktop valuations: six methods instead of one or two, Monte Carlo instead of a single point estimate, and an exit readiness framework that most valuers never include.

It is not a replacement for a formal valuation opinion for regulatory or legal purposes. It is a replacement for every other context where someone needs to understand what a business is worth and what drives that number.

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