How to Value Your UK Small Business in 2025

Understanding Business Valuation

Accurate valuation is the bedrock of any buy-or-sell decision, especially for bricks-and-mortar businesses such as manufacturers, hotels, care homes or multi-site retail groups. Whether you’re exiting, refinancing or scaling by acquisition, you need a defensible number that captures both earnings power and the value locked in your buildings. This guide expands on the three headline approaches-market-multiple, asset-based and discounted cash-flow (DCF)-and folds in 2024-25 UK market data for property-backed enterprises.

Multiple-Based Valuation Method

For trading businesses with premises, advisers benchmark your adjusted EBITDA (or profit before tax for owner-managed firms) against completed deals in comparable, property-heavy sectors:

Hotels & Hospitality: 6–9 × EBITDA for freehold provincial hotels; prime London assets can stretch to 10–12 ×¹
Care Homes: 5–12 × EBITDA (or £30k–£360k per bed) depending on occupancy and compliance grades²
Manufacturing & Engineering: 4–6 × EBITDA for profitable, asset-rich plants³
Retail Portfolios (convenience, garden centres, forecourts): 3–5 × EBITDA, with premiums for freehold sites and long WAULTs⁴

Multiples tighten or widen with lease length, building condition, energy-efficiency ratings and regional demand. To push toward the upper quartile, review our sale-readiness playbook for tips on boosting recurring revenue and documenting maintenance schedules.

Asset-Based Valuation

This method totals the fair-market value of your tangible assets-land, buildings, plant and then layers in intangible items such as brand goodwill. Key property tweaks:

Commission up-to-date RICS Red Book valuations for each freehold or long leasehold site.
Deduct any dilapidations / cap-ex backlog uncovered in the latest condition survey.
Apply capital allowances on eligible fixtures; unclaimed pools lift post-tax value for buyers.

See our step-by-step valuation workbook for the schedules HMRC expects when property makes up most of the price.

Discounted Cash-Flow Valuation

DCF discounts forecast free cash flows and a terminal value back at your weighted average cost of capital (WACC). In 2025 most private, property-backed SMEs land between 8 % and 11 % WACC:

Risk-free base: 5-year gilt yields ≈ 3.4 %
Debt cost: senior real-estate loans ≈ +350 bp over SONIA
Equity premium: 4.5–5.5 % for unquoted UK firms

Because rent or mortgage payments flow through EBITDA, model maintenance cap-ex and refurbishment cycles explicitly—skipping them can overstate free cash flow and inflate value.

Market Factors Affecting UK Business Values

Interest rates The Bank of England trimmed the base rate to 4.5 % (Feb 2025), cutting DSCR hurdles on commercial mortgages and supporting higher multiples in property-heavy trades.

Inflation CPIH slowed to 3.4 % (Mar 2025), easing utilities and wage pressure, though the National Living Wage jump to £12.21/hour (Apr 2025) still squeezes EBITDA in labour-intensive hospitality.

Lending appetite — Challenger banks funded 60 % of new SME loans in 2024, often secured on freehold premises—good news for buyers targeting leveraged buyouts.

Tax Business Asset Disposal Relief keeps CGT at 10 % on the first £1 m of lifetime gains, making share sales of freehold-holding companies more attractive than asset deals.

Preparing Your Building-Based Business for Valuation

Normalise accounts—strip personal drawings and property revaluation gains.
Update maintenance records to prove no hidden cap-ex bombs.
Lock in key managers & caretakers on retention bonuses.
Verify planning permissions and environmental compliance for each site.
Run vendor due diligence 6-12 months pre-sale—see our checklist.

Need a defendable price range?

Upload your latest accounts and property valuations to our free valuation sandbox and receive a sanity-checked range within 48 hours.