Insights

Many SME owners already have a sense of what their company is worth. You may have had a business valuation prepared, been given a range by an adviser, or built your own estimate from earnings and multiples.

At that point, the question changes. It is no longer just "what is my business worth?". The more useful question becomes: "what is driving that number up or down and what can I do about it over the next few years?"

A valuation is not only a number on a report. It is a snapshot of your earnings, risk profile and growth story at a point in time. The good news is that, in most SMEs, many of the drivers behind any business valuation are within your control.

A simple frame: earnings, multiples and where owners can move the dial

Most SME valuations, and any formal Business Valuation, come back, in some form, to two things:

• The level and quality of earnings, often expressed as EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation)
• The multiple buyers, lenders or investors are willing to apply

You increase Business Valuation by:

• Strengthening earnings and making them more predictable
• Reducing risks and improving the growth story, so the business justifies a stronger multiple

None of this needs complicated modelling. It does need a clear view of how the business really performs and a decision to work on the parts that hold value back. The levers below sit in those two areas.

Lever 1: Improve the quality and visibility of your earnings

When buyers and investors talk about "quality of earnings", they are asking a simple question. How much of this profit is cash-backed, repeatable and likely to be there next year?

You can improve the quality and visibility of earnings by:

• Building more recurring or contracted revenue: retainers, subscriptions, service plans or maintenance contracts that renew by default, not one-off jobs sold from scratch each time.
• Reducing dependence on one-off, lumpy projects: especially where delivery is complex, overruns are common or margins are hard to control.
• Tightening revenue recognition and cut-off: so, invoices are raised promptly and reported revenue reflects work done.

From a business valuation perspective, this does two things. It makes future earnings more predictable, and it makes your reported numbers more believable. Buyers and lenders will usually pay more for earnings they can see and trust.

A part-time Finance Director or CFO can help you segment revenue into truly repeatable lines versus one-off work, and shape your pricing and offer structure around that so it supports a stronger business valuation over time.

Lever 2: Strengthen margins and working capital discipline

Headline revenue growth gets attention. Sustained margins, good cash conversion and disciplined reporting do more for business valuation.

Focus on margin, not just turnover

Start by understanding where you really make money.

• Look at gross margin by customer, product or service, not just at a single blended percentage.
• Identify low-margin work that ties up capacity without contributing much profit and decide whether to improve pricing or let some of that work go.
• Keep a close eye on discounting, extras and scope creep that quietly erode margin over time.

Improving margin lifts EBITDA directly. It also signals that the business is selective and disciplined, not simply chasing volume.

Treat working capital as a value lever

Working capital habits show up quickly in the bank balance and in how robust the business looks.

Practical steps include:

• Reducing debtor days through clearer terms, upfront payments where appropriate, and firm but fair credit control.
• Managing stock and work-in-progress so cash is not trapped in slow-moving lines or jobs that drag on without billing.
• Reviewing supplier terms so you are not funding other people's cash flow unnecessarily.

Better working capital management strengthens your business valuation in two ways. It supports healthier cash flow from the same level of earnings, and it shows that the business is run with financial discipline.

Lever 3: Reduce customer concentration and key-person risk

A business valuation is not just about how much profit you make. It is also about how fragile those profits look.

Two common areas of fragility are customer concentration and key-person risk.

Customer concentration

If one or two customers account for a large share of revenue, many buyers will shade the multiple down. The concern is simple: losing that relationship would have a serious impact on the business.

You can reduce this risk gradually by:

• Setting an internal view of what feels like an acceptable percentage of revenue from any single customer.
• Tracking that exposure over time and flagging when it moves above your comfort level.
• Targeting new customers with similar profiles so you still play to your strengths while spreading revenue.

Key-person risk

Key-person risk is not only about the founder. It includes any individual whose knowledge, relationships or technical skills would be difficult to replace quickly.

Practical actions include:

• Moving important customer relationships from a single individual to a small team, with more than one point of contact.
• Sharing critical process knowledge through documentation, checklists and cross-training.
• Involving second-line managers in board or leadership conversations so they understand context and priorities.

Reducing these risks does not change your current profit overnight. It does, however, make that profit more resilient. A stronger risk profile supports a stronger multiple in any serious business valuation discussion and makes it easier to defend the number in front of a buyer or lender.

Lever 4: Reduce owner dependency through systems and management

Many SME owners recognise this picture. Every major decision still crosses your desk. You are copied into most of the important emails. If you step away for any length of time, the pace slows.

From a business valuation perspective, this creates a problem. A buyer is being asked to pay for the business, but a great deal of value still sits in the owner.

You can start to change that by:

• Documenting key processes: particularly how you bring work in, deliver it and get paid. The aim is not a huge manual, just clear, current guides that people follow.
• Investing in simple, reliable systems: to track sales pipeline, orders, delivery, invoicing and cash. The tools do not need to be complex; they do need to be used consistently.
• Building a small leadership group: with clear areas of responsibility and enough authority to make decisions without checking every detail with you.

As owner dependency reduces, the business looks more like a standalone asset and less like an extension of one person. That makes it easier to sell, easier to fund and easier to value with confidence in any future business valuation.

Lever 5: Clarify and evidence your growth story

Valuation is influenced by more than what you earned last year. Buyers and investors also look for a credible story about where future returns will come from.

A clear growth story does not need a glossy deck. It does need to show that you understand your market, your economics and your next steps well enough to talk them through without slides.

Practical elements include:

• A simple three-year view of where you want revenue and profit to move and why that path makes sense.
• A clear picture of which markets, segments or products you plan to grow, and which you will deprioritise.
• Evidence that demand is real such as a visible sales pipeline, realistic conversion rates, retention data or repeat purchase patterns.

For anyone assessing business valuation, this gives context. It shows that past performance is not a one-off and that there is a plan behind the numbers. That can support a stronger multiple than a business of similar size with no clear direction and improves how your business growth strategy is viewed.

Bringing the levers together: think in stages, not quick fixes

Most SMEs cannot work on all these levers at once. The point is not to launch a dozen projects. It is to pick the ones that matter most for you now.

A practical way to think about it is:

• If your numbers and cash feel unclear, start with margins and working capital. This kind of staged approach is how we think about your business journey.
• If those foundations are in better shape, focus on customer concentration and key-person risk.
• As resilience improves, shift more attention to recurring revenue and the growth story.

Each improvement contributes to business valuation. Just as importantly, it usually makes the business easier to run day-to-day.

How Evoke helps you move from valuation to action

A standalone business valuation gives you a number and some insight. On its own, it does not change the business.

At Evoke, we work with SME owners who want to understand value and then improve it. That often starts with using a business valuation as a baseline, then identifying which levers will make the greatest difference over the next few years.

We bring part-time Finance Directors, CFOs and Commercial Directors into your business, alongside growth strategy and succession planning support. Together we build a practical plan to improve earnings quality, resilience and the growth story, and we stay involved to help you deliver it, not just write it down.

If you would like to turn a one-off business valuation into a clear, staged plan to increase the value of your business and prepare for a future business exit strategy, we are ready to talk.