How to value a UK limited company

Why a range, not a single number

Private companies don't trade on a screen — their value depends on who's buying, why, and when. The honest answer to “what is this worth?” is always a range: a floor below which a reasonable buyer wouldn't walk away, and a ceiling above which no reasonable buyer would pay. Anyone giving you a single point estimate is, at best, picking the middle of a range for you.

Valio produces three separate valuations — multiples-based, DCF, and asset-based — then blends them into a defensible low / mid / high. The three approaches answer subtly different questions and help you sanity-check each other.

1. The multiples approach

The most common way private companies change hands. You look at what comparable companies have sold for (or currently trade at, if listed), express the price as a multiple of a financial metric like EBITDA or revenue, then apply that multiple to the target.

Valio uses EV/EBITDA as the primary multiple, with EV/Sales as a cross-check for lower-margin or early-stage businesses, and P/E for asset-light services firms. We pull UK comparables from Companies House with the same SIC code, filter to businesses within 0.5x–2x of the target's revenue, and take the median to dampen outliers.

Because most of our comparable data is drawn from the listed-company universe, we apply a 25% SMB discount for illiquidity and control — consistent with common UK M&A practice for non-listed targets.

2. Discounted cash flow (DCF)

The most theoretically defensible method: project a company's free cash flow forward, discount each year back to today at a rate reflecting the risk, and add a terminal value for everything after the forecast horizon.

Valio's default DCF uses a five-year projection period, a growth rate derived from the trailing three-year revenue CAGR (capped at 15% to avoid unrealistic extrapolation), a discount rate of 12% (adjustable — the SMB-appropriate midpoint between listed- equity WACC and private-equity hurdle rates), and a terminal growth rate of 2% (roughly long-run UK real GDP + inflation). You can override any of these from the valuation page.

DCF is most useful when a business has a stable margin profile and predictable capex. It tends to produce the widest range because small changes to growth or discount rate compound over five years — which is exactly why Valio shows sensitivity analysis alongside the base case.

3. Asset-based valuation

Net book value, with adjustments for the market value of real estate, inventory, and receivables, minus debt. Used mainly as a floor — no rational seller parts with a business for less than its tangible net worth — and as the primary methodology for unprofitable or asset-heavy businesses where earnings-based approaches don't converge.

Blending the three

For a profitable trading business, Valio weights the three methodologies roughly 50% multiples / 40% DCF / 10% asset-based — reflecting how the UK mid-market actually transacts. For unprofitable companies, asset-based becomes the anchor and the multiples / DCF methods are treated as upside scenarios only.

Sensitivity analysis

Alongside the base case, every Valio report includes a bull / base / bear scenario showing how the valuation range moves with realistic swings in growth rate and discount rate. This is what turns a number from “interesting” into “actionable” — you can see whether a deal is still attractive if growth comes in 300bp below plan.

The honest limitations

• Any valuation built on filed accounts is a historical view. Recent pipeline, customer concentration, and management quality aren't in the numbers.
• Abridged or micro-entity accounts can omit turnover. Valio flags these and narrows the methodologies accordingly.
• Valuations are indicative. They're a starting point for conversation — not a formal valuation, and not regulated financial advice.

What next

The fastest way to understand the methodology is to run it on a company you already know. Sign up, search for it, and hit Generate valuation — the full report explains every input and output alongside the numbers.