This calculator is provided as a tool to help you assess the valuation of your client's business so that you can make a recommendation of the protection they need. You'll need to work with the company or partnership accountant to verify the net profit and net asset figures.
% of company
Average of last 3 years Net profit
PE ratio as appropriate for business
Net assets of the business
The average of the last three years net profit should be used.
This is usually turnover less cost of sales less all overheads and financial arrangements.
Price Earnings ratios are quoted in the share pages of the financial press. However these figures are for quoted businesses which often have a greater liquidity than a private company and as such a lower multiple should be applied.
Suggested ranges to consider:
- Steadily increasing profits - five to seven
- Regular but not increasing profits - three to four
- Slightly reducing profits - one to two
- No profits or losses - not appropriate method
Value of share in business
Potential value of the business
This is the potential value of the business and the estimated total amount of cover required
There are many ways of arriving at the value of a business, not just the example method we've given.
Share valuations illustrate the amount of cover that may be needed for each shareholder.
The figures are based on the information you've given.
This site is intended for UK authorised & regulated financial advisers only. It is not intended for onward transmission to retail customers & should not be relied upon by any other person. If you are not an adviser please return to our consumer site.