Business valuation basics

What a business is actually worth

There is no single formula. Most small-business valuations weigh a combination of proven turnover and profit, the value of physical assets like equipment and stock, and the strength of the trading position — an established customer base, a long lease, reliable staff and a good location all add value that does not show up on a balance sheet.

Two businesses with identical equipment can be worth very different amounts if one has loyal weekday customers and the other has to rebuild its trade from scratch.

The numbers buyers ask to see

Expect to review turnover records, recent profit figures, the current stock count at valuation, and the terms of the lease including remaining years and renewal conditions. For most businesses, ask whether the owner draws a salary and whether any of the turnover depends on contracts or personal relationships that will not transfer.

A seller who keeps clean records and answers these questions openly is usually a good sign. Reluctance to share basics is a reason to slow down.

Sanity checks before you commit

Compare the asking price against what similar businesses in the area have listed for, and think about how long it would realistically take you to earn back your investment from the income the business generates. Consider seasonal patterns too — a café that looks quiet in winter may still be a strong buy if its peak season carries the year.

Independent professional advice pays for itself. An accountant or experienced business adviser can review the numbers and flag issues you may not spot, and valuers can provide a formal valuation where the stakes justify it.

What Touchbase does and does not do

Touchbase is an advertising and connection platform. Listings are provided by advertisers and are not verified or valued by Touchbase, so treat every asking price as a starting point for your own due diligence and negotiation.