What is my Irish business worth, and how buyers actually work it out

The question comes up in the first ten minutes of most conversations I have. What is it worth. The honest answer is that a business is worth what a buyer will pay for it, but that is not much use to you when you are trying to plan. So here is the arithmetic buyers use, and where the argument really happens.

Your accounts are prepared to satisfy the Revenue and your accountant, not to show a buyer what the business earns. A buyer rebuilds the profit figure from scratch. They add back the costs that belong to you rather than to the trade, and they take out the ones you have been avoiding.

Add-backs usually include an above-market owner salary, pension contributions made for tax reasons, the jeep, family members on payroll who do not work in the business, and one-off legal or professional fees. Deductions usually include the market salary of whoever will do your job after you go, deferred maintenance, and any capital expenditure the business has been putting off.

The number you end up with is the earnings a new owner could reasonably expect. Every conversation after that is about how confident anyone can be in it.

The multiple is not a market rate you look up. It is the buyer's judgement about how likely that profit is to still be there in three years. A business with recurring contracts, a spread of customers, a management team and clean records sits at the top of its range. A business with one big customer, one salesperson who is also the owner, and three years of inconsistent accounts sits at the bottom, or attracts an offer loaded with deferred payments.

There is no published table of Irish SME multiples, so treat what follows as my own read from the deals I have worked on as a broker. In that experience, trading companies turning over €1m to €10m have tended to fall between three and six times adjusted profit. Professional service firms with recurring fees and low owner reliance can go higher. Contracting businesses that live project to project usually go lower. Asset-heavy businesses get valued differently again, because the property or plant carries value of its own. Your own business could sit outside that range in either direction, which is exactly why a proper read is worth doing before you plan around a number.

Push the multiple by one turn on €600,000 of adjusted profit and you have moved the price by €600,000. That is the same money as adding €150,000 of profit at a four times multiple, and it is usually easier to do.

Customer concentration under control, so no single account is a large share of profit. Revenue that repeats, whether by contract, service agreement or genuine habit. A second person who can price work and hold the main relationships. Three years of accounts that tell the same story as your management figures. Written processes for the things you currently hold in your head.

None of these are dramatic. All of them take time, which is why the work needs to start two or three years before you want to sell, not when the first approach lands.

Owner dependence is the most expensive item on the list. After that comes a trading dip in the year you go to market, because buyers price the trend and not the best year. Then unresolved matters, an employment issue, a lease that expires, a shareholder agreement that was never signed, tax that was never fully cleaned up. Each one becomes either a deduction or a chunk of price held back until a condition is met.

The pattern I see most often is not a bad business getting a bad price. It is a good business getting a fair price for a version of itself that nobody could verify.

Take last year's accounts, rebuild the profit with honest add-backs and honest deductions, then apply a range rather than a single multiple. Write down the three risks a buyer would name in your business. That range and those three risks are a more useful planning document than any certificate of valuation.

If you want the read done properly, that is the sort of thing the free introductory call and the Selling Up session are for.

Where does the profit come from, and how much of it is repeatable next year. Who holds the relationships, and what happens to those relationships at completion. And what would have to go wrong for this business to lose money. Every piece of diligence I have sat through is a longer version of those three questions.

If you can answer all three with documents rather than with reassurance, you are in a different negotiation. The owners who struggle are not the ones with weak businesses, they are the ones whose answers live in their own heads.

A headline price is only part of the story. How much lands on day one, how much sits in deferred payments, how much depends on the business hitting figures after you leave, and what you are asked to warrant afterwards all change what the deal is genuinely worth to you.

I have seen a lower headline price be the better deal because more of it was cash at completion and less of it was conditional. That comparison is difficult to make on your own and it is one of the things worth an hour of conversation before you go anywhere near a process.

Three years out, the work is commercial. Fix pricing, reduce the concentration in your customer book, get a second person able to hold the main relationships, and start recording how decisions get made.

Two years out, the work turns to evidence. Consistent accounts that agree with your management figures, a clean set of contracts and leases, employment matters resolved, and a written picture of how the business runs. Nothing here is complicated. It is just slow, and it does not compress into the six weeks after an approach arrives.