What Are My Shares Worth? How To Value Your Shares

If you run a private company in the UK, you’ll eventually face the question: what are my shares worth? Whether you’re raising capital, issuing employee options, buying back leavers’ shares or planning an exit, getting to a sensible, defensible number matters.

In this guide, we’ll demystify how shares are valued in private companies, the legal factors that can push the price up or down, and the steps you can take to evidence a valuation that stands up to scrutiny under UK law.

Why Share Valuation Matters For Small Businesses

Share valuation isn’t just a finance exercise - it underpins big decisions that shape your business’ future. A realistic, well-evidenced valuation helps you:

• Price new shares fairly when you’re raising investment (and avoid unnecessary share dilution).
• Set strike prices and discounts when you grant employee options, especially for EMI options.
• Run compliant buybacks of leavers’ or founder shares and show you paid a fair price.
• Resolve shareholder exits and disputes faster with less friction.
• Support HMRC positions for tax (for example, Capital Gains Tax on a sale, or valuations connected to options).

If the number isn’t credible, deals stall, investors lose confidence and tax risk creeps in. The good news? With the right process and paperwork, you can get to a valuation that’s both commercially sensible and compliant.

What Does “Share Value” Actually Mean?

Before you crunch numbers, make sure you’re valuing the right thing in the right way. A few definitions in plain English:

• Enterprise value vs equity value. Enterprise value looks at the business as a whole (ignoring how it’s funded). Equity value is enterprise value minus net debt plus excess cash. Your shares represent equity value, then divided by how value is allocated across classes and shareholdings.
• Pre-money vs post-money. Pre-money is what the company is worth immediately before new investment. Post-money is after the cash lands. If an investor buys 20% for £500k, post-money is £2.5m and pre-money is £2.0m.
• Share classes and rights. Not all ordinary shares are equal. Preference shares, liquidation preferences, anti-dilution protections, dividend rights, and conversion terms all affect what a specific class is worth. The same “headline valuation” can translate into very different outcomes by class.
• Minority discounts and control premiums. A small, non-controlling stake is typically worth less per share than a controlling stake. This reflects limited control, lack of liquidity and information rights. Conversely, a controlling block can command a premium.
• Marketability (liquidity) discounts. Private company shares are harder to sell than listed shares. Valuations often reflect a discount because there’s no active market.

It’s also common for valuation to be defined by contract. Your Shareholders Agreement or Articles of Association may include a valuation mechanism for transfers (e.g. fair value determined by an independent valuer, with discount rules for leavers). Those clauses can be decisive in practice.

Common Valuation Methods For Private Companies

There’s no one “right” method - it depends on your business model, size, stage and data quality. In private UK companies, these are the usual suspects:

1) Comparable Company Multiples (Revenue or EBITDA)

Find comparable public companies or private deals and apply a revenue or EBITDA multiple to your metrics, then adjust for size, growth, risk and profitability.

• Pros: Market-referenced, quick to explain to investors.
• Cons: Finding true peers is hard; accounting differences can distort EBITDA; early-stage companies may have little or negative EBITDA.

2) Discounted Cash Flow (DCF)

Forecast free cash flows and discount them back at a rate reflecting risk (your weighted average cost of capital). Often cross-checked with a terminal value using a long-term growth rate or exit multiple.

• Pros: Explicitly links value to your plan and risk.
• Cons: Sensitive to assumptions; can be over-precise for early-stage companies.

3) Transaction Comparables

Use multiples observed in recent acquisitions or funding rounds for similar businesses. This can be compelling where there’s an active M&A or venture market in your niche.

• Pros: Anchored to real deals; resonates with buyers.
• Cons: Deal terms vary (earn-outs, preferences); data can be limited or confidential.

4) Asset-Based (Net Asset Value)

Value the business based on the fair value of assets minus liabilities. Useful for asset-heavy businesses (property holding, some manufacturing) or where cash generation is secondary.

• Pros: Concrete; grounded in balance sheet.
• Cons: Often undervalues brand, IP and growth; less relevant for service/SaaS models.

5) Stage-Appropriate Rules Of Thumb

For very early-stage ventures with minimal revenue, investors may reference typical pre-seed/seed ranges and adjust for team, traction, IP, market size and defensibility. This is more art than science, but still benefits from structure and benchmarking.

Whichever method you use, document your inputs, justify your peer group and show your workings. That paper trail is what makes a valuation credible. If you need a deeper primer, this walkthrough on how to value company shares in the UK is a helpful companion.

Event-Driven Valuations: How To Approach Different Scenarios

“What are my shares worth?” is usually triggered by a specific event. Your approach should fit the context and legal requirements for that scenario.

1) Fundraising And New Share Issues

Here, valuation becomes your price. Pre-money and post-money arithmetic must be crystal-clear so everyone understands the % they’ll hold after the round. Key points:

• Be consistent with your method - most growth rounds anchor on revenue or ARR multiples, adjusted for growth and gross margin.
• Model the cap table after the raise, including option pool expansions, so there are no surprises on dilution.
• Check pre-emption rights in your Articles and Shareholders Agreement to manage priority rights and timelines.
• Use a clear Term Sheet to align on valuation, class of shares and investor rights before you incur heavy legals.
• When investors are buying existing shares (a secondary), a Share Sale Agreement documents the transfer and warranties.

2) Employee Options And EMI

For EMI options, two valuation concepts matter: Unrestricted Market Value (UMV) and Actual Market Value (AMV). UMV is essentially the value ignoring restrictions; AMV reflects certain restrictions that reduce value. HMRC accepts agreed valuations for a limited period (typically 90 days) from its Shares & Assets Valuation team.

• Document the method and assumptions (multiples/DCF) used to arrive at UMV/AMV, including any discounts applied for minority and lack of marketability.
• Submit to HMRC and use the agreed valuation window to grant options on time.
• Keep board minutes approving option grants and strike prices.

If you’re new to EMI, it’s worth getting tailored help on option scheme rules and valuation - start with UMV basics and an EMI options setup that fits your cap table.

3) Leaver Events And Buybacks

When a founder or employee leaves, you may buy back or transfer their shares. The Companies Act 2006 sets strict procedures for on-market and off-market buybacks, including funding, contracts and filings. Price often follows a fair value formula - and some agreements discount “bad leaver” shares.

• Check your leaver definitions and valuation rules in your Shareholders Agreement and Articles first.
• Use an independent valuation (or a formula) and keep a trail of the assumptions.
• Follow buyback formalities and consider a dedicated Share Buyback Agreement for off-market purchases.
• For redemption of redeemable shares, follow the process for redeeming shares and file on time.

If you get procedure or pricing wrong, the buyback can be void or open to challenge, and you may face penalties or disputes. Make sure both the numbers and the process are tidy.

4) Partial Exits Or Secondary Sales

When an existing shareholder sells to a third party, valuation drives price and tax. Practical tips:

• Check transfer restrictions, pre-emption rights and drag/tag clauses in your constitutional documents. Rights can affect what a buyer will pay.
• Budget stamp duty at 0.5% on share transfers over £1,000 (rounded up to the nearest £5).
• Use a robust Share Sale Agreement covering price, completion mechanics and warranties, especially if the buyer isn’t already on your cap table.

5) Disputes And Divorce Of Partners

In shareholder disputes or compulsory transfers, valuation often moves from “market” to “fair” value under the contract or a court-appointed expert. Minority discounts may or may not apply depending on the drafting and circumstances. Having a clear mechanism upfront in your Shareholders Agreement usually saves time and cost later.

Legal Documents And Approvals To Get Right

Valuation is one side of the coin; the other is making sure your governance and paperwork support the number and the transaction.

• Shareholders Agreement and Articles. Include transfer restrictions, pre-emption rights, valuation mechanisms, leaver provisions, drag-along/tag-along and option pool rules. Clauses around drag-along rights can be decisive at exit.
• Board and shareholder approvals. New issues, buybacks and option grants typically require board resolutions; some actions need ordinary or special resolutions under the Companies Act 2006.
• Buyback compliance. Off-market buybacks require a written contract approved by shareholders, solvency considerations, funding from distributable profits or a fresh issue, and Companies House filings. Get advice early.
• Option documentation. EMI or non-EMI option agreements should track the agreed valuation, vesting and leaver rules and be reflected in the option register.
• Sale and subscription contracts. Use the right agreement for the transaction type - a Share Subscription Agreement when issuing new shares, a Share Sale Agreement for secondaries, and a Share Buyback Agreement for company repurchases.
• Records and evidence. Keep your valuation report, comparable sets, DCF model, board minutes and any HMRC correspondence together. This history matters if you’re ever challenged.

It can feel like a lot, but a strong governance framework makes every future share transaction quicker and less stressful.

Getting A Robust, Defensible Valuation: Practical Steps

You don’t need a 200-page report for every event - but you do need a process that’s proportionate and defendable. Here’s a simple playbook:

1) Define The Purpose And Standard Of Value

Are you pricing a seed round, agreeing an EMI value, running a buyback, or settling a dispute? The purpose affects method, discounts and documentation. Write this down at the start.

2) Gather Clean, Current Data

• Historical P&L and balance sheets (ideally 24–36 months), KPIs (ARR, churn, CAC/LTV, utilisation), customer concentration and pipeline.
• Forecasts with assumptions: growth drivers, margin path, hiring plan and capital needs.
• Legal context: share classes, preferences, option pool, pre-emption rights and transfer restrictions.

3) Pick A Primary Method And A Cross-Check

Choose a primary method that suits your stage (e.g. ARR multiples for SaaS, EBITDA multiples for profitable services, DCF for predictable cash generators). Then sanity-check with another approach or a market benchmark.

4) Apply Relevant Discounts And Rights

Adjust for minority position and lack of marketability where appropriate. Reflect class rights (e.g. liquidation preferences) in how value allocates across the cap table. If your documents say a specific mechanism applies (e.g. an independent valuer), follow it.

5) Document Assumptions And Approval

Put the method, assumptions, key inputs and calculations in writing. Include your peer set and why you chose it. Approve the valuation via board minutes, and where required, shareholder resolutions.

6) Keep It Proportionate

For small internal transactions, a concise memo with workings may be enough. For larger raises or contentious transfers, consider an independent valuation. The goal is evidence that would make sense to a reasonable third party.

7) Plan For The Next Round

Think ahead: if your valuation sets a high watermark, can you grow into it? Over-pricing can make the next round harder and increase liquidation preference overhang. Build headroom and keep an eye on dilution; your dilution strategy should match your growth plan.

Key Takeaways

• “What are my shares worth?” depends on context: fundraising, EMI, buybacks and exits each have different standards and documentation needs.
• Use methods that fit your stage - multiples, DCF or asset-based - and cross-check your result. Evidence your assumptions and peer group.
• Rights and restrictions matter. Minority and marketability discounts, preferences, drag/tag and pre-emption can all move the needle.
• Get your legal building blocks in place: Articles, a clear Shareholders Agreement, option plan rules and the right transaction contracts.
• For EMI, understand UMV vs AMV, align with HMRC and keep to the time window. Start with the UMV position and an EMI options plan that fits your cap table.
• When buying back or redeeming shares, follow Companies Act procedures and use a Share Buyback Agreement or redemption process to keep the transaction valid.
• A proportionate process plus tidy records go a long way. If the stakes are high or the situation is contentious, get independent advice and formal valuation support.

If you’d like help setting up the right documents or sense‑checking your valuation approach, you can reach us on 08081347754 or team@sprintlaw.co.uk for a free, no‑obligations chat.