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Sell-side
The Valuation Gap: Why Most UK Business Owners Go to Market at the Wrong Price
Your accountant's valuation and what a buyer will actually pay are two very different numbers. Understanding the gap between them — and who fills it — could be the most important thing you do before selling your business.
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KEY HIGHLIGHTS:
An accountant's valuation answers a compliance question, not a market one — and the two produce very different numbers.
More than half of sales that reach serious negotiation are repriced or abandoned, usually over this gap.
The multiple a buyer pays is a judgement about risk and strategic fit — and judgements can be influenced.
The value that justifies the highest multiples rarely appears anywhere in the accounts.
This is not a criticism of accountants. It is a precise observation about what they are trained to do, which is to value a business accurately for compliance, tax planning, and financial reporting purposes. What they are not trained to do — and what most would readily acknowledge if asked — is tell you what a motivated strategic buyer, operating in a competitive process with a specific acquisition agenda, would pay for your business on a Tuesday morning in the current market. Those are entirely different questions, and conflating them is where sellers lose money before the process has even begun.
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THE ACCOUNTANT'S NUMBER
What Your Accountant's Valuation Is Actually For
An accountant's valuation looks at what you have built in terms that can be verified and defended: your profits over the past three years, your assets, your liabilities, your earnings before interest, tax, depreciation, and amortisation — and applies a sector benchmark multiple to arrive at a number. It has genuine utility for succession planning, shareholder disputes, and conversations with your bank. What it reflects is the fair market value of your business as a standalone entity, assessed by a hypothetical buyer operating without specific motivation or competitive pressure.
The problem is that hypothetical buyers do not actually buy businesses. Real buyers do — and they are anything but hypothetical, or even rational. They have strategic priorities, portfolio gaps, growth targets, and timelines. They have competitors they are trying to outmanoeuvre and markets they are under pressure to enter. When the right buyer encounters the right business at the right moment, the question they are answering is not "what is the fair market value of this asset?" It is "what is this worth to us, specifically, given everything we are trying to achieve?" Those two questions produce very different answers — and the difference between them is where the real value in your sale is either captured or lost.
An accountant's valuation is built to be verified and defended. It was never built to tell you what a motivated buyer would pay.
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THE MULTIPLE
The Multiple Is a Judgement, Not a Calculation
UK transaction data for the first half of 2025 makes this concrete. For smaller owner-managed businesses generating around £200,000 in annual profit, the average sale multiple is around 3x earnings. For businesses generating £10 million in profit, that multiple sits closer to 8.5x. The business is not five times better in any absolute sense. It is simply bigger, which makes it less risky, more financeable, and more interesting to a wider pool of buyers — and that perceived attractiveness is what the multiple is actually measuring. The multiple, in other words, is a judgement. And judgements can be influenced.
£600k
£200k profit × 3× — the standalone valuation
£1.2m
£200k profit × 6× — the right buyer, competitive process
Same business. Same earnings. The £600k difference is not in the numbers — it is in who is telling the story, and to whom.
A skilled M&A adviser does not apply a multiple and present the result. They ask a different set of questions entirely: Who are the most motivated buyers for this specific business? What does it give them that they cannot easily build or buy elsewhere? How do we create a process in which more than one serious buyer is competing at the same time? Your business is worth what a buyer will pay for it — but what a buyer will pay depends enormously on what they understand about what they are buying, and who is doing the telling.
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THE HIDDEN VALUE
The Value a Spreadsheet Cannot Capture
Your business almost certainly has value that does not appear anywhere in your profit and loss account. The customers who have bought from you for fifteen years and would not transfer their loyalty lightly. The market position that a new entrant could not replicate without spending years and millions getting there. The reputation that wins contracts without tendering. The team that runs without you in the room. None of these appear as line items. None of them move your EBITDA. And yet, to the right buyer, every single one is a reason to pay more.
A business with strong brand loyalty in a fragmented market is not just a profitable business — it is a platform. Genuine barriers to entry, whether regulatory, technical, or relational, are not just assets — they are a moat. A business that fits cleanly into an acquirer's portfolio, completing a geographic footprint or adding a capability they lack, is not just a transaction — it is a solution to a problem they have been trying to solve. The buyers who recognise this will pay for it. In practice, the difference between a seller who understands this and one who doesn't is often the difference between a 3x multiple and a 6x multiple on the same underlying earnings — which, on a business with healthy margins, can represent several million pounds.
Byron Stone
Founder & Managing Partner
Byron has spent the past decade in senior operating roles across consumer brands, e-commerce, and direct-to-consumer businesses — leading growth, raising institutional capital, and building the operational backbone that takes founder-led companies through scale and exit. He started Stone & Co to do M&A advisory the way he believes it should be done — partner-led, technology-native, and entirely on the owner's side of the table.
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Occasional notes from Stone & Co on the M&A market - valuations, the decisions that define what comes next, and the opportunities most firms never surface. Written for owners and acquirers, not for the inboxes.
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