Question 1

How do you value a private company?

Accepted Answer

A private company is valued by combining several established methods and reconciling them into a defensible range. The income approach discounts forecast cash flows or maintainable earnings to present value. The market approach applies multiples from comparable quoted companies and precedent transactions. The asset approach values the underlying net assets, which suits property-rich or holding companies. We normalise the financials first, removing one-off items and adjusting owner remuneration to a market rate, then weight the methods according to the business and the purpose of the valuation. The output is a documented range with the key assumptions and sensitivities set out.

Question 2

What valuation methods do you use?

Accepted Answer

We use the three recognised approaches and select among them according to the business and the reason for the valuation. The income approach, usually a discounted cash flow, is central for companies with forecastable earnings. The market approach uses comparable company multiples and precedent transaction multiples to benchmark value against observed evidence. The asset-based approach values net assets and is appropriate for property, investment or holding companies. For early-stage companies we also apply methods suited to limited financial history. We cross-check the results across methods so the conclusion does not rest on a single technique.

Question 3

What is the difference between fair value and market value?

Accepted Answer

Market value and fair value are distinct standards, and the correct one depends on why the valuation is needed. Market value is the price a willing buyer and willing seller would agree in an open market, and it underpins most transactions and tax valuations. Fair value is a defined measurement used in financial reporting under IFRS and in certain shareholder contexts, and it can exclude discounts that a market valuation would apply, for example a minority discount in some statutory situations. Defining the basis of value at the outset is essential, because the same business can carry a different figure under each standard.

Question 4

How do you value a pre-revenue or early-stage startup?

Accepted Answer

Early-stage and pre-revenue companies cannot be valued on historical earnings, so the methods differ. We look at the size of the addressable market, the strength of the team, the technology and intellectual property, traction such as users or pipeline, and evidence from recent funding rounds and comparable early-stage transactions. Scenario-based discounted cash flow, the venture capital method and market benchmarking each contribute a perspective. The result is expressed as a range with clearly stated assumptions, because uncertainty is high at this stage. For companies raising under SEIS or EIS, the valuation also has to fit the share structure and scheme rules.

Question 5

What discount rate do you use in a DCF?

Accepted Answer

The discount rate reflects the risk of the cash flows being valued. For an established company we build it from the cost of equity and, where relevant, the weighted average cost of capital, taking account of the risk-free rate, an equity risk premium, and company-specific and country risk. Early-stage and higher-risk businesses justify a higher rate to reflect the greater chance that forecasts are not met. The rate is one of the most sensitive inputs in a valuation, so we stress-test it and show how the conclusion moves across a range rather than relying on a single point.

Question 6

What is a discount for lack of marketability?

Accepted Answer

A discount for lack of marketability, often shortened to DLOM, reflects the fact that shares in a private company cannot be sold as readily as quoted shares. A buyer of an unquoted holding accepts reduced liquidity, so the value is adjusted downward to reflect that. The size of the discount depends on factors such as the prospect of a future sale or listing, dividend policy, and any restrictions in the shareholders' agreement. A related adjustment is the minority discount, applied where the holding does not carry control. We document the basis for any discount so the figure can withstand scrutiny in a transaction, a tax review or a dispute.

Question 7

Do you provide valuations for tax purposes?

Accepted Answer

Yes. We prepare valuations for a range of UK tax purposes, including share valuations for HMRC, valuations for gift and inheritance planning, and valuations supporting corporate reorganisations. Tax valuations generally use the statutory market value standard and must be supported in a form that can be defended to HMRC if questioned. Employee share schemes are a common reason for a tax valuation, in particular agreeing the value of shares under an EMI option scheme. We set out the methodology and assumptions clearly so the valuation stands up to review by the relevant tax authority.

Question 8

Can you provide a valuation for IFRS or financial reporting?

Accepted Answer

Yes. We provide valuations required under IFRS and other reporting frameworks, including purchase price allocation after an acquisition, impairment testing of goodwill and intangible assets, and the valuation of share-based payments. Financial reporting valuations use the fair value standard defined in the accounting standards and are prepared to a level of documentation that supports the audit. We work alongside the company's finance team and auditors so the assumptions, methods and conclusions are consistent with the reporting requirements and can be reviewed without friction during the audit.

Question 9

Do you provide valuations for EMI share option schemes?

Accepted Answer

Yes. Companies granting options under the Enterprise Management Incentive scheme need a defensible valuation of their shares to set the exercise price and to agree the position with HMRC. The valuation must reflect the specific rights of the shares under option, including any minority position and marketability discount. We prepare the valuation and the supporting rationale so it can be submitted to HMRC for agreement before options are granted, giving the company and its employees certainty on the tax treatment. The same approach applies to other UK employee share schemes.

Question 10

How do you value a business for a shareholder dispute?

Accepted Answer

Valuations for disputes, including shareholder exits, unfair prejudice claims and matrimonial cases, require independence and a clear, reasoned methodology, because the figure may be tested by another expert or by a court. We establish the correct valuation date and basis of value, which in some statutory disputes excludes a minority discount, then apply the appropriate methods and document every assumption. The report is written to stand as expert evidence, setting out the reasoning transparently so it can withstand challenge. Independence is central: the conclusion follows the evidence rather than the interests of the instructing party.

Question 11

What multiple should my business sell for?

Accepted Answer

Businesses are commonly valued as a multiple of earnings, usually EBITDA or, for smaller companies, adjusted profit, and the multiple reflects the quality and durability of those earnings. Sector, growth rate, recurring revenue, customer concentration, management depth and size all move the multiple, so two companies with similar profit can command very different figures. Observed multiples from comparable quoted companies and recent transactions provide the benchmark. A meaningful multiple only emerges once earnings have been normalised, which is why we establish maintainable earnings before applying any market evidence.

Question 12

How long does a valuation take and what do you need?

Accepted Answer

Timing depends on the size and complexity of the business and the purpose of the valuation. An indicative range can be prepared quickly once financial statements and forecasts are available, while a full report for a transaction, tax filing, financial reporting or a dispute takes longer because it requires deeper analysis and documentation. The core inputs are historical accounts, management accounts, forecasts, details of the share structure and any shareholders' agreement, and background on the business and its market. The more complete the information, the tighter the valuation range, because uncertainty falls as the evidence improves.

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Purpose and Basis of Value

Financial Analysis and Normalisation

Method Selection and Application

Benchmarking and Cross-Check

Discounts, Sensitivity and Reporting

Assets and situations we value

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