We looked at nearly 7,500 small business valuations performed between 2015 and 2017 to find the average value for small businesses around the UK, and can reveal that:
The business transfer market is much like the housing market, with prices rising and falling and some areas being more sought-after than others. Unlike the housing market though, prices are more closely related to turnover and profit – with the financials of a business playing a large part in deciding its value.
Falling values mean small businesses are facing rising costs or falling revenues, and less potential return on investment should owners choose to sell.
The North-South divide can certainly be seen in small business values, with the average price of a small business in the South being £12,000 more than one in the North. Whilst sellers in the North could expect to make £79,000 from selling their business, this figure rises to £91,000 in the South.
London is the heart of business, and nowhere are the prices more liable to change than in the capital.
Small business prices in South London are at an average of £67,000, with this figure rising to £97,000 in North London. This rises further to a staggering £169,000 in North-West London.
Looking at the last three years, we can see that the overall value for London is almost the same as 2015 – though crucially it’s dropped compared to 2016. The current average of £95,000 is higher than the 2015 median of £94,000, though down considerably on 2016’s average of £115,000.
What this means for small business owners is that should they wish to sell their business now, rather than last year, they’ll stand to make £20,000 less than they could have done.
“It’s frustrating to see that small businesses are reducing in value across the UK, leaving the nations’ small business owners with diminishing levels of return on their hard work and investment. In a period of economic uncertainty however, this is not unexpected.
“It’s interesting to see the differing values from region to region, and surprising how only short geographical boundaries can make a large difference to a business’ value. London in particular has seen a dramatic swing in values over the past year.
“A business’ value is in many instances tied to revenues, and particularly profit, so falling values may be indicative of a fall in these across the board, with a recent rise in interest rates putting further strain on the UK’s small businesses.
“Profitability decreases in a small business is often attributed to an increase in its variable costs, such a business rates or utilities. With this being the case, I would urge the government to work harder to relieve the strain on small business owners and allow them to make a fair return on their hard work. This should include allowing them to protect their investments through tax allowances when exiting their small business.”
Sean Mallon, CEO of Bizdaq
Bizdaq is dedicated to making the process of selling a business easier and more cost effective for small business owners. Bizdaq features include an online valuation tool that instantly estimates the likely sale value of any business, step-by-step instructions and notifications to help business sellers and buyers through the business transfer process for themselves. This report is part of Bizdaq’s mission to increase the awareness of small business owners, and how hard they work to keep both their businesses and economies going.