A third (33%) of business owners in the UK don’t know how much their business is worth, according to new research from Marktlink, one of Europe’s largest independent international M&A advisory firms for SMEs.

Despite this, as market conditions look set to improve, three-quarters (75%) of SME leaders expect the value of their business to increase in the next 12 months. When compared to the European average of 72%, UK SMEs are most optimistic about growth in valuations as they come out of the other side of a tumultuous year.

The second instalment of the firm’s Marktlink Monitor surveyed 1066 business owners across the UK, Netherlands, Belgium, Denmark, and the Nordics, with 224 respondents from UK SMEs.

Following a range of challenges for business leaders over the past 18 months, many are focusing on rebuilding and maximising the value of their business, with 21% of business owners saying they would prefer not to know the value of their business at present.

Of those who are aware of the value of their company, almost a third (32%) feel that it is currently unvalued, reflecting high expectations from business owners or lower valuations after a turbulent economic period.

Commenting on this, Joe Moran, managing partner at Marktlink’s Midlands office, said: “Often, business owners’ expectations of the value of their company are high which is understandable considering the pride and personal value associated with it. However, these optimistic expectations don’t always align with what buyers are prepared to pay, particularly in difficult economic times. These circumstances make it more important than ever for entrepreneurs to seek experienced advisors to help construct deals that meet both parties’ objectives.”

Jonny Parkinson, managing partner at Marktlink’s Manchester office, added: “Having an accurate business valuation is key for business owners and step one if they’re considering a sale. With 2024 expected to bring a much brighter outlook for M&A activity, SME leaders need to be aware of their business value to be able to take advantage of an increase in opportunities and ensure they are ‘exit ready’.

“This is equally important for owners who may not be considering a sale immediately. If activity increases during the year as expected, then it becomes increasingly likely that owners may receive uninitiated approaches and will require prior knowledge of their business value to benchmark against. Even if a sale isn’t a consideration for the next five years or more, working with an adviser to establish a current valuation and a plan to reach a desired valuation will help to close the expectation gap and allow shareholders to maximise value when they decide to exit.”

The Marktlink Monitor research surveyed an internationally representative sample of SME owners on a range of business issues. Those countries taking part included the UK, Netherlands, Belgium, German and Nordic nations.