Methodology
Valuation Methodology
ValuBase estimates an indicative Enterprise Value using a transparent, sequential approach calibrated to UK SME market evidence. Financial performance, market calibration and business-specific characteristics are considered separately so the assumptions behind the valuation remain visible.
Methodology at a glance
From reported performance to indicative Enterprise Value
The valuation is constructed progressively rather than by applying a single generic multiple to the latest reported EBITDA.
Each stage addresses a different component of valuation: the earnings base, the market multiple and the characteristics of the individual business.
01 — Earnings normalisation
Establish an adjusted earnings base
Reported EBITDA may contain items that do not represent the sustainable economics of the business. ValuBase therefore allows reported earnings to be normalised before the valuation multiple is applied.
Add-backs
Relevant exceptional, non-recurring or owner-specific costs may be added back where they are not expected to continue under normal ownership.
Downward adjustments
Earnings may also require downward normalisation where reported performance includes exceptional income or costs that a buyer would reasonably expect the business to incur.
Adjusted EBITDA
The resulting adjusted EBITDA provides a more appropriate starting point for assessing sustainable earnings than relying solely on the reported figure.
02 — Maintainable EBITDA
Estimate the earnings a buyer may regard as sustainable
Valuation should reflect maintainable earnings rather than automatically assuming that one historical year represents future performance. ValuBase therefore considers three years of adjusted financial performance and allows the appropriate Maintainable EBITDA methodology to be selected.
Latest year
Gives greatest relevance to the most recent adjusted trading performance.
Weighted average
Places greater emphasis on recent performance while retaining information from earlier years.
Simple average
Uses the average adjusted EBITDA across the historical period.
Manual assumption
Allows an alternative Maintainable EBITDA assumption where professional judgement or circumstances make the automated historical methods inappropriate.
The selected Maintainable EBITDA becomes the earnings base to which the market-calibrated valuation multiple is applied.
03 — Business-size calibration
Establish a size-calibrated baseline multiple
SME valuation multiples are not uniform. Business scale and profitability influence the multiples observed in transactions, with larger and more profitable businesses generally attracting different valuation characteristics from smaller businesses.
ValuBase uses business size to establish the baseline multiple before sector and company-specific factors are considered. This prevents the valuation from relying on a single generic SME EBITDA multiple.
Proprietary calibration data is not disclosed on this page.
04 — Sector & subsector calibration
Reflect the market in which the business operates
Businesses generating the same level of EBITDA can command materially different transaction multiples depending on their industry characteristics. ValuBase therefore calibrates the size-based multiple to the selected sector and subsector.
Business size
Baseline multiple
Sector & subsector
Market calibration
Result
Market-calibrated multiple
This separates broad market pricing from the characteristics of the individual company, which are assessed in the next stage.
05 — Business quality & risk
Adjust for the characteristics of the individual business
A market multiple provides a reference point, but individual businesses differ in quality, resilience and saleability. ValuBase uses a structured business-quality assessment to reflect these differences.
A. Market & Competitive Position
Sector outlook, competitive position, pricing power and growth capacity.
B. Customers & Revenue Quality
Customer retention, new customer acquisition and forward revenue visibility.
C. Operations & Dependence
Supplier concentration, owner dependence, transition risk, capex intensity and premises.
D. Business Quality & Saleability
Financial information quality, historical performance, buyer universe and deal-structure flexibility.
The assessment produces a company-specific adjustment to the market-calibrated valuation rather than replacing the underlying market methodology.
06 — Customer concentration
Reflect dependence on major customers
Customer concentration can materially affect the risk profile and saleability of an SME. A business that depends heavily on one or a small number of customers may carry greater revenue risk than a similarly profitable business with a diversified customer base.
ValuBase incorporates customer-concentration information into the company-specific assessment so that revenue dependency is reflected separately from the underlying market multiple.
07 — Indicative valuation range
Present valuation as a range, not false precision
Private-company valuation is inherently judgemental. ValuBase therefore presents a conservative, midpoint and optimistic Enterprise Value rather than suggesting that a business has one precisely measurable value.
The midpoint represents the central calibrated estimate, while the surrounding range illustrates reasonable variation around that estimate.
Understanding the output
Enterprise Value is not necessarily the value of the shares
ValuBase estimates Enterprise Value — the indicative value of the underlying business operations before adjusting for the company's financing position and other transaction-specific balance-sheet items.
In an actual transaction, the amount attributable to the shares may require adjustments for cash, debt, debt-like items, working capital and other agreed items. Transaction structure, due diligence findings and negotiation can also affect the final consideration.
ValuBase does not currently imply that the Enterprise Value shown is the amount payable for the shares.
Transparency & limitations
An analytical estimate, not a formal valuation
ValuBase is designed to provide a structured and transparent indicative valuation. It is an analytical tool rather than a substitute for transaction advice, professional valuation work or detailed due diligence.
Transparent assumptions
The earnings methodology, market calibration and business-specific adjustments are shown so the user can understand how the valuation has been constructed.
Indicative, not definitive
Actual transaction values may differ materially because of buyer appetite, strategic value, deal structure, financing, due diligence and negotiation.
Professional judgement remains relevant
Valuation inputs and adjustments should be considered carefully and should not be treated as automatically correct merely because they can be entered into the tool.
ValuBase provides an indicative valuation estimate for informational purposes only. It is not a formal valuation, investment, financial, legal or tax advice, and is not an offer to buy or sell a business. Actual transaction value may differ materially.
Ready to value a business?
Build an indicative Enterprise Value range using financial performance, market calibration and business-specific factors.
No account required. Financial inputs are processed in your browser and are not saved.