Valuation
UK Sector Valuation Guide: How 15 Trades Are Valued and Structured
How UK businesses are valued in 15 sectors: the earnings measure buyers use, what moves the multiple, common structures and the first diligence check.
Short answer
UK private businesses are usually valued on a multiple of earnings, but the earnings measure and what moves the multiple differ by sector. Owner-run trades are often priced on SDE, larger firms on EBITDA, and recurring-revenue businesses on revenue quality. Recurring income, owner independence and customer spread raise the multiple in almost every sector.
Key takeaways
- Smaller owner-run businesses are commonly priced on seller's discretionary earnings (SDE); larger ones on adjusted EBITDA.
- Recurring or contracted income, low dependence on the owner and a spread customer base raise value in every sector below.
- Earn-outs and deferred consideration are most common where revenue depends on the seller's relationships.
- Each sector has one diligence question that matters more than the rest — the table names it.
- This guide states no multiples: a figure without a source and a date is not evidence. Run your own numbers through a full valuation.
How to read this guide
Each row describes how buyers typically approach a sector: the earnings figure the price is usually struck on, what moves the price, the structures that are common, and the first diligence question. It is a starting point for a conversation, not a price list. For the method behind the numbers, see what multiple should I pay for a business and EBITDA vs SDE.
Fifteen UK sectors compared
| Sector | Usual earnings measure | What raises value | Common structure | Check first |
|---|---|---|---|---|
| Accountancy practices | Recurring fees; SDE or EBITDA | Compliance fees on retainer, client retention, staff not partner-led | Deferred or retention-based consideration | Client retention after the partner leaves |
| IT managed services | EBITDA | Monthly recurring contracts, long terms, low churn | Cash plus earn-out on recurring revenue | Contract terms and change-of-control clauses |
| Software (SaaS) | Recurring revenue and growth | Net revenue retention, gross margin, low churn | Cash plus earn-out | Churn and revenue recognition |
| Building compliance and fire safety | EBITDA | Contracted maintenance, accreditations, regulatory demand | Cash plus deferred | Accreditations transfer and engineer retention |
| HVAC and plumbing | SDE or EBITDA | Service contracts over one-off installs, commercial clients | Cash plus vendor loan note | Share of revenue from maintenance contracts |
| Electrical contractors | SDE or EBITDA | Repeat commercial clients, framework places | Cash plus deferred | Project margins and retentions owed |
| Food manufacturing | EBITDA | Branded or own-label contracts, retailer spread, site certifications | Cash plus earn-out | Retailer concentration and food-safety record |
| Engineering and precision manufacturing | EBITDA | Long-term supply agreements, niche capability | Cash plus deferred | Customer concentration and plant condition |
| Logistics and haulage | EBITDA (after fleet costs) | Contracted routes, modern fleet, driver retention | Cash plus asset finance | Fleet age, finance and operator licence |
| Recruitment | EBITDA | Permanent-to-contract mix, contractor margin, client spread | Earn-out heavy | Dependence on individual consultants |
| Marketing and creative agencies | EBITDA | Retainers over projects, client tenure | Earn-out heavy | Top-client concentration |
| Care homes and domiciliary care | EBITDA | CQC rating, occupancy, local-authority vs private mix | Cash, often with property | CQC reports and staffing |
| Dental and veterinary practices | EBITDA | Private vs contract income, clinician retention | Cash plus clinician tie-in | Who generates the revenue and their contracts |
| Facilities management and cleaning | EBITDA | Multi-year contracts, TUPE-clean workforce | Cash plus deferred | Contract renewal dates and margins |
| Wholesale and distribution | EBITDA | Exclusive supplier agreements, broad customer base | Cash plus stock adjustment | Supplier terms and stock valuation |
What moves value in every sector
- Recurring income. Contracted or repeat revenue is worth more than one-off project work, because it is more predictable.
- Owner independence. A business that runs without the seller is easier to finance and to buy.
- Customer spread. Heavy reliance on one customer lowers value — see customer concentration risk.
- Quality of earnings. Clean, adjusted figures that tie to filed accounts support a higher price — see quality of earnings reports.
Service businesses versus product businesses
Service businesses — accountancy, IT support, recruitment, agencies, cleaning and care — sell the time and skill of their people. Their value rests on whether clients stay when ownership changes, so buyers look hard at contract terms, the length of client relationships and how much of the work the seller personally wins or delivers. A practice where the founder signs every engagement letter is a different asset from one where a team of managers holds the client relationships, even if the two report the same profit.
Product businesses — food manufacturing, engineering, wholesale — carry stock, plant and supplier relationships. Their value rests on margins holding through the cycle and on the condition of the assets. Buyers therefore spend more of their diligence on the balance sheet: how stock is valued, how old the machinery is, whether the site is owned or leased, and what capital spending has been deferred. In these sectors the working capital true-up at completion is often a larger figure than in a service business, which is why the working capital peg calculator is worth running early.
Asset-heavy service businesses such as haulage sit between the two. The vehicles are both the means of earning and a financing question: a modern fleet supports asset finance and lowers the equity a buyer needs, while an ageing one is a capital bill waiting for the new owner. Buyers usually look at earnings after the true cost of keeping the fleet on the road rather than before it.
How sector shapes the deal structure
The way the price is paid follows the risk the buyer sees. Where the risk is that revenue walks out with the seller, buyers defer part of the price or tie it to performance through an earn-out. Where the risk is the balance sheet, they rely on completion accounts or a locked box with tight protections — see locked box vs completion accounts. Where the seller wants a quicker exit and the buyer needs help funding the price, a vendor loan note is common.
Regulated sectors add a layer. Care providers need registration with the Care Quality Commission to continue, logistics operators need an operator licence, and many building-safety firms depend on accreditations held by named individuals. Whether these transfer on a share purchase or must be re-applied for on an asset purchase can decide the structure on its own — see asset purchase vs share purchase.
In every sector the starting point is the same: understand which figure the price is struck on, read the accounts behind it, and test what happens to earnings if the risk named in the table above comes true. A valuation that holds up under that test is one a lender and an investment committee will accept.
Using this guide on a live deal
- Name the earnings figure. Agree with the seller or broker whether the price is quoted on SDE, adjusted EBITDA or something else, and reconcile it to the filed accounts before discussing a multiple.
- Test the sector risk. Take the "check first" item from the table and ask for the evidence early: client lists with tenure, contract schedules, accreditation certificates, fleet registers or inspection reports.
- Match the structure to the risk. If the risk sits with the seller's relationships, propose deferred or performance-linked consideration; if it sits on the balance sheet, focus on the completion mechanism and the working capital peg.
- Model the downside. Re-run the price assuming the main risk partly happens — a key client leaves, margins compress, a licence takes months to transfer — and check the deal still works for you and any lender.
- Write it down. Record the assumptions you relied on so that, when diligence changes one, you know which part of the price it touches.
Frequently asked questions
Which earnings figure do UK buyers use?
- Smaller owner-managed businesses are often priced on seller's discretionary earnings, which adds back the owner's pay. Larger businesses with a management team are usually priced on adjusted EBITDA.
Why does recurring revenue raise value?
- Because it reduces the risk that earnings fall after the sale, which makes the business easier to finance and the forecast more reliable.
When is an earn-out common?
- When revenue depends on the seller's personal relationships, as in recruitment, agencies and professional services, buyers often tie part of the price to future performance.
Where can I get a figure for my business?
- Use Value My Deal, which runs five valuation methods on your own numbers.
Put this to work in TrueValue
Related guides
- What Multiple Should You Pay for a Business?
A comparable-transaction multiple is evidence of what the market has paid, not a target for what you should pay. The number that actually matters is the highest multiple your funding and your required return can support without the deal being fragile — and that ceiling is usually below the top of the comparable range.
- EBITDA vs SDE in Business Acquisitions
Two earnings figures, two multiples, one business. Which to use depends on who will run it — and confusing them is the most expensive mistake in small-business M&A.
- Customer Concentration Risk in M&A: How to Measure and Price It
One customer can be most of the earnings. How to measure the exposure, what makes it worse, and how to price and structure around it.
- What Is a Quality of Earnings (QoE) Report?
A quality of earnings report tests whether the profit a seller presents is the profit a buyer will actually receive — and it is not the same exercise as an audit.