How is a facilities management business valued?

Almost always on a multiple of adjusted EBITDA, with the contract book deciding where in the range the business sits. Contract length, renewal history, client concentration, the hard and soft mix and how much work is self-delivered are the five inputs that move it most. Turnover by itself settles almost none of it.

Do I need to be selling to get a valuation?

No, and most owners who ask are planning rather than selling. A baseline is more useful early than late, because it shows which of the things a buyer prices are still fixable in the time you have. Asking the question starts nothing and commits you to nothing.

What information do I need to hand before I start?

Three years of accounts, a contract register showing start and end dates, notice periods and renewal history, and a rough split of revenue between hard and soft services. If you also know what share of income comes from your largest client and how much work you subcontract, you have most of it. Nothing beyond that is needed for a baseline.

Will the answer change much over a year?

It can move a long way, which is the point of asking early. A contract renewed on a longer term, a client added in a new sector, or a manager taking over relationships the owner used to hold will each change the number. So will losing a large contract. Twelve months is long enough to move a valuation in either direction, which is the argument for knowing where you start.

Why January Is When FM Owners Start Asking What It Is Worth

The QuestionThe question that survives the Christmas shutdown

January is the month FM owners ask what the business is worth, and the calendar explains that better than sentiment does. The fortnight either side of Christmas is the only stretch in the year when a facilities management business runs on a skeleton rota and nobody is bidding anything. Most owners spend part of it thinking about the next five years, and by the first Monday back the thought has hardened into a question.

The question is rarely about selling this year. From the conversations I have with FM owners, it is usually about wanting a number to plan against: whether the business would fund the retirement, whether anyone in the family wants it, whether the contract that ends in eighteen months changes the whole picture. A valuation is the only way to answer any of those, and it is the cheapest part of the process by a wide margin.

January is also the point in the FM calendar where client budgets reset. Service charge budgets, annual spend approvals and the first renewal conversations of the year land in the same few weeks, which means you are already holding most of the information a valuation needs. The timing is convenient rather than symbolic.

The InputsWhat a baseline valuation of an FM business looks at

The contract book is the first input and the largest. Not turnover, but what that turnover is contracted for: how many months remain on each agreement, what notice each party has to give, which contracts renewed last time and which went back out to tender. A business with three-year terms and a long renewal record reads completely differently from one carrying the same revenue on rolling purchase orders.

Adjusted EBITDA is the second. That is the profit the business makes once the owner's remuneration is set at a market rate, one-off costs are stripped out and any personal expenditure running through the accounts is added back. Most owner-managed FM businesses have a higher adjusted figure than their statutory accounts suggest, and the adjustments are worth doing properly, because a buyer will test every one of them.

Then the shape of the book: the split between hard and soft services, how much of the work you self-deliver rather than subcontract, how much sits with your largest client, and which client sectors you serve. Each of those is a separate line in a buyer's model and each moves the answer independently of the others.

The last input is you. How far the business depends on the owner personally, in pricing, in client relationships and in writing the bids, is the most common single reason an offer arrives lower than the owner expected.

A business with three-year terms and a long renewal record reads completely differently from one carrying the same revenue on rolling purchase orders.

The RunwayWhat twelve months of runway is actually worth

The gap between a valuation in January and money in the bank is longer than most owners assume. A prepared FM sale occupies six to nine months between going to market and completion, and the preparation that makes the process worth running takes longer than that again. January is useful precisely because it is early.

Tax belongs in that arithmetic and it is worth stating flatly. Business Asset Disposal Relief is 10% today. The Autumn Budget on 30 October 2024 set it to rise to 14% on 6 April 2025 and to 18% on 6 April 2026, the relief stays capped at £1m of qualifying gains over a lifetime, and the completion date governs which rate applies. Anti-forestalling rules have applied to contracts entered into since Budget day.

None of that is a reason to rush. A contract renewed on a three-year term in March prices higher than the same contract renewed for twelve months in a hurry, and the difference in price will usually outweigh anything the tax calendar is doing. The useful January question is not when to sell. It is what the business would have to look like to be worth selling.

Start With a Baseline

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