How Much Should You Apply For? A Realistic Guide to Your Monthly Valuation

Introduction - Guide to Valuation

When you’re raising finance, for new kit, extra crews, or bridging cash between stage payments, two questions matter most: what’s the business worth, and how much should you ask for? Get either wrong, and you risk expensive borrowing, unnecessary dilution, or a deal that collapses at the finish line.

For construction and engineering firms, the challenge is sharper: project timings, retentions, variations, and materials volatility all distort cash flow.

At Jones Financial Accounts (JFA) we help SMEs build evidence-based valuations and funding asks that lenders and investors trust.

In this guide, we show you how to balance valuation (what you’re worth) with need (what you should raise) in clear, practical steps that protect profit and control.

What you need to review

A smart funding ask starts with facts, not wishes. Review these essentials:

• Use of funds (bottom-up): Itemise where every pound will go, equipment, vehicles, hires, mobilisation costs, marketing, software, contingency, fees, and VAT. This isn’t a list; it’s a schedule with dates.

  
  

• Working capital cycle: Map debtor days, supplier terms, payroll timing, and retentions to see peak cash dips. Use a 13-week rolling cash-flow plus a 12-month view.

  
  

• Unit economics & project margins: Prove that each additional crew or machine generates positive gross margin after overhead recovery (fuel, insurance, yard, management time).

  
  

• Capacity plan: Show utilisation assumptions for assets (e.g., excavator hours/month) and teams (billable vs non-billable).

  
  

• Serviceability: Model repayments (or dividend expectations) with headroom, interest cover, DSCR, and covenant sensitivity.

  
  

• Valuation cross-checks: Sense-check value using (i) earnings multiple, (ii) asset-backed value, and (iii) cash-flow (DCF), then anchor to the lowest credible range.

  
  

If any one of these pieces is missing or optimistic, the funding ask becomes fragile. Lenders and investors back evidence and control, not hope.

Why it matters for businesses

Done right, valuation and ask size accelerate growth without risking control or cash flow. Done wrong, they create long-term drag.

A groundworks firm needs two machines and a senior supervisor. They build a cash-flow that includes mobilisation, insurance, training, retentions timing, and a 10% contingency.

They raise just enough through a blend of asset finance (for kit) and a small working-capital line. Utilisation hits plan; repayments are covered with 30% headroom. Result: margins protected, no equity given away.

Another contractor raises a large equity round at an inflated valuation, based on “pipeline.” Costs rise to match the cash in the bank. When material prices spike and two stage payments slip, they burn funds faster than expected. A down-round follows, diluting founders and spooking staff and suppliers.

The benefit of doing this correctly is control, of timing, covenants, dilution, and growth pace. The risk of ignoring it is permanent margin erosion, strained relationships, and decision-making driven by cash panic rather than strategy.

Strategy to get it right

Use this CFO playbook:

1. Start with “need,” not valuation. 

   Build a 18–24 month plan: what assets, hires, and working capital are required to hit realistic revenue. Add fees, VAT, and a contingency equal to at least one payroll cycle.

   
   

2. Match funding to purpose.

   • Productive assets → asset finance/HP/lease (term aligned to useful life).

   • Timing gaps → invoice finance/overdraft (short-term, revolving).

   • Big strategy shifts → equity (patient capital, no repayments).

     
     

3. Model three scenarios. 

   Base, Upside, Downside (materials +10%, debtor days +20, one project delayed). Ensure covenants and cash stay safe in Downside.

   
   

4. Plan exit and milestones.

   Define what the money buys, when risk reduces, and what KPIs unlock cheaper refinance (e.g., move from overdraft to term debt at month 12).

   
   

5. Tell the story with evidence.

   One-page summary, sources & uses table, KPI dashboard, cash-flow graphs, and covenant headroom chart.

   
   

This approach gets deals approved, and keeps you safe after drawdown.

Common mistakes (with consequences)

• Asking for too little. You close the round, then run out of cash before retentions release. Consequence: emergency funding on worse terms, lost supplier trust.

  
  

• Asking for too much. Unused cash invites waste and increases fees/dilution. Consequence: lower returns, tough future rounds, reputational dent (“over-raised, under-delivered”).

  
  

• Inflated forecasts. Ignoring seasonality, mobilisation lag, or training ramp. Consequence: covenant breaches, penalty rates, or a down-round.

  
  

• Wrong instrument for the job. Funding long-life assets with an overdraft, or payroll with a five-year loan. Consequence: liquidity crunch or paying interest on idle kit.

  
  

• No sensitivity testing. One slip in debtor days and VAT/PAYE becomes late. Consequence: HMRC penalties, lender confidence hit, and increased pricing.

  
  

• Forgetting transaction costs & VAT. Legal, arrangement, documentation, valuation fees. Consequence: a funding hole on day one.

  
  

Each mistake compounds, financially (higher costs), operationally (delays), and reputationally (harder future funding).

Misconceptions

• “Higher valuation is always better.” Not if it blocks the next round or forces a painful down-round. Sustainable > shiny.

  
  

• “Debt is cheaper, so always choose debt.” Cheap until covenants break; then it’s the most expensive money you’ll ever take.

  
  

• “Investors fund ideas.” They fund traction, margin proof, and control, especially in construction where execution risk is real.

  
  

• “Grants are free money.” Often slow, specific, and administration-heavy. Great if aligned, risky if they distort your plan.

Why professional support pays off (how JFA helps)

At JFA, we combine site-level reality with board-level finance so your valuation and funding ask land first time, and hold up under scrutiny.

• Foundations: Clean books, reliable job costing, VAT/CIS in order, no surprises in diligence.

• Visibility: 13-week cash-flow + 12–24 month forecast, sources & uses, and utilisation modelling for plant and teams.

• Control: Sensitivity analysis, covenant headroom, and a clear refinancing path to lower-cost capital as you de-risk.

• Strategy: We structure the right mix (asset finance, revolving lines, equity), align terms to asset life, and negotiate fees.

• Partnership: Ongoing FD support, monthly MI packs, lender updates, and course corrections before issues become problems.

  
  

The outcome: you raise enough, on the right terms, at a defensible valuation, with a plan that protects margins and ownership.

Key takeaways

• Build your ask from a bottom-up plan; let valuation follow evidence.

• Match money to purpose: assets, working capital, or strategy, all different tools.

• Stress-test cash and covenants; protect headroom in the downside.

• JFA turns numbers into a credible story lenders and investors back.

Wrapping up today's insights, tomorrow we simplify another accounting challenge