Map responsibilities rather than relying on job titles
List what the owner does each week: winning work, approving prices, delivering services, maintaining supplier relationships and managing staff. Record who can make each decision in their absence. A managing director title may conceal several operational roles, while a business with modest headcount may still have well-documented, transferable processes.
Separate replacement cost from transition risk
The cost of employing someone to perform ongoing work belongs in the earnings analysis where appropriate. The risk that customers leave during the handover is a different issue. Explain how each is treated so the same concern is not counted twice without justification. A replacement salary does not automatically resolve the continuity of a personal customer relationship.
Illustration: equal profit, different evidence
| Question | Company A | Company B |
|---|---|---|
| Reported annual EBITDA | £250,000 | £250,000 |
| Who owns major customer relationships? | Owner alone | Account team with documented contacts |
| Who can approve delivery and pricing? | Owner | Delegated managers within agreed limits |
| What should the valuation investigate? | Replacement cost and transition assumptions | How delegation operates in practice |
These hypothetical companies have the same reported EBITDA. The table does not imply a recommended discount or a guaranteed valuation difference. Evidence about continuity, costs and other business risks must be assessed together.
Prepare a handover evidence pack
Document responsibilities, delegated authority, team capability and customer coverage. Show how repeat orders arrive, where contracts sit and how the business handles absence. Retain evidence of processes operating in practice. A newly written manual without demonstrated use is weaker evidence than a process already followed by the team.
Turn the question into a valuation brief
Explain the owner’s intended departure date, transition commitment and any continuing role. Distinguish a complete exit from a sale with a management contract or earn-out. Those arrangements can change the commercial discussion. Organising this information helps an adviser state assumptions openly rather than infer them from the accounts.
Read how replacement pay affects normalised earnings and use the readiness checklist to identify missing evidence.