Business valuation guide
Most small and mid-sized manufacturers in Australia sell for 1.5 to 5 times their adjusted earnings, usually including the plant and equipment needed to run them, plus stock at value. Where yours sits depends on how widely sales are spread across customers, the state of the equipment, and whether production and sales run without you.
Typical multiples
Brokers value manufacturers as a multiple of adjusted earnings. For owner-run businesses that is usually PEBITDA (profit before interest, tax, depreciation and amortisation, with one working owner’s wage added back). For businesses with a management team it is EBITDA, with a market salary for every role. The ranges below include the plant and equipment the business needs, with stock added on top.
| Type of business | Typical multiple | What puts it there |
|---|---|---|
| Small job shop or owner-run manufacturer | 1.5x to 2.5x | Adjusted earnings under about $300,000, the owner running sales and the floor, a few large customers. Price often sits close to the value of the plant. |
| Established manufacturer | 2.5x to 3.5x | Earnings of about $300,000 to $1 million, a production manager in place, repeat customers across several industries, well-maintained equipment. |
| Specialist or IP-led manufacturer | 3.5x to 5.0x | Own products or patented designs, supply agreements, certifications such as ISO 9001, and room to grow without major new equipment. |
| Large or freehold manufacturers | Case by case | Larger operations and businesses sold with their factory are valued on earnings and property together, usually with a formal valuation. |
When the plant is worth more than the earnings. In capital-heavy manufacturing, the market value of the equipment can exceed the value of the profit it earns. Then the price tends to follow an independent plant and equipment valuation. For transactions above $2 million, Benchmark Corporate advises on valuation and deal structure.
The method
Use two or three years of accounts. Add back one working owner's wage, depreciation, interest and genuine one-offs, and take out profit from any order that will not repeat. The business terms glossary explains PEBITDA and add-backs.
Compare depreciation with what you actually spend each year to maintain and replace equipment. If a major machine is due for replacement, a buyer will deduct its cost or lower the multiple.
Start from the table above, then adjust for customer spread, order book, gross margin trend, spare capacity, certifications and staff stability.
Raw materials, work in progress and finished goods are usually added at cost, excluding obsolete stock. List plant at market value, not replacement cost, and check the price against that floor. More in selling a business that carries stock.
Worked example
18 staff, owner runs sales, workshop manager employed, leased factory with eight years left including options. Figures are illustrative.
| Net profit per the accounts | $420,000 |
|---|---|
| + Owner's wage (one working owner) | $140,000 |
| + Depreciation | $110,000 |
| + Interest on equipment finance | $35,000 |
| + One-off cost of relocating a press brake | $25,000 |
| Adjusted earnings (PEBITDA) | $730,000 |
| Multiple (established manufacturer) | 2.2x to 2.8x |
| Indicative price range | $1,606,000 to $2,044,000 |
| Plus stock at value | about $180,000 |
Return check: at $1,825,000 (2.5x), a buyer who steps into the owner's role keeps $590,000 a year before tax. Allowing $110,000 a year to keep the plant up to date, that is a 26% return on the price.
Valuation methods
A multiple of adjusted earnings is the starting point for almost every manufacturer. Asset value matters more here than in most industries, because it sets a floor and sometimes decides the price.
| Method | How it works | Use for a manufacturer |
|---|---|---|
| Multiple of adjusted profit | Adjusted profit × an industry multiple. | The main method for owner-run job shops and small manufacturers. |
| EBITDA multiple | Earnings before interest, tax, depreciation and amortisation × a multiple, with a market salary for every role. | Manufacturers with a management team, and sales to larger buyers. |
| Asset value | Market value of plant, equipment and stock, less liabilities taken on. | Sets the floor. Often decides the price for capital-heavy or low-profit operations. |
| Discounted cash flow | Forecast cash flows discounted back to today. | Larger manufacturers with long-term supply contracts or planned expansion. |
| Revenue multiple | Annual revenue × a multiple. | A rough cross-check only. Margins vary too much between manufacturers. |
For the general principles behind every method, see our guide on how to value a business.
Key numbers
Buyers look past the profit figure to how reliable it is and what it will cost to keep it. Have these numbers ready for the last three years.
| Metric | How it is worked out | What buyers want to see |
|---|---|---|
| Gross margin | Revenue less materials and direct labour, ÷ revenue, by product line. | Steady or improving, with pricing that keeps pace with material costs. |
| Customer concentration | Revenue from the largest customer, and the top five, ÷ total revenue. | No single customer large enough that losing it would put the business at risk. |
| Order book | Value of confirmed orders and repeat schedules not yet delivered. | Enough forward work to carry the business through a handover. |
| Capacity utilisation | Machine or labour hours used ÷ hours available. | Room to grow without buying major new equipment. |
| Sustaining capital spend | Average yearly spend to maintain and replace equipment. | Roughly matched by depreciation, with no backlog of overdue replacements. |
| Stock turns | Cost of goods sold ÷ average stock held. | Stock that moves, with little obsolete or slow-moving material. |
| Scrap and rework | Defective output ÷ total output. | Low, measured and falling. |
Why sustaining capital spend matters. Adding back depreciation makes earnings look higher, but machines still wear out. Buyers estimate what the plant will cost to keep running, and if your spending has fallen behind, they price in the catch-up.
Buyer checklist
Two manufacturers with the same profit can sell for very different prices. These are the items buyers and their advisers check in due diligence, and where the multiple is won or lost.
On what goodwill is made of: the types of business goodwill. What buyers check, in order: due diligence explained.
Before you sell
Value comes from two things: more reliable earnings, and less risk for the buyer. Every extra $50,000 of provable earnings adds $100,000 to $150,000 to the price at typical manufacturing multiples.
Common mistakes
Most manufacturing sales that fall short do so because the buyer finds the earnings depend on one customer, the owner, or equipment that is near the end of its life.
See what buyers are looking at in engineering and manufacturing businesses for sale right now.
Know your number
Our engineering and manufacturing brokers value businesses against real sales data from 27+ years of business sales. Confidential and no obligation.
FAQs
Most sell for 1.5 to 5 times adjusted earnings, including the plant and equipment needed to run them, plus stock. Established manufacturers with a production manager and a spread of customers usually sell for around 2.5 to 3.5 times. Specialist manufacturers with their own products or patents can reach 5 times EBITDA.
Usually, yes. The equipment needed to earn the profit is included in a price based on an earnings multiple. Surplus equipment is sold separately, and finance owing is normally paid out by the seller at settlement. When the plant is worth more than the earnings justify, the price tends to follow an independent plant valuation.
Raw materials, work in progress and finished goods are usually counted at settlement and paid for at cost, on top of the price. Obsolete or slow-moving stock is excluded. Some contracts include an agreed level of stock in the price instead, with an adjustment if the count is higher or lower.
Directly. Buyers estimate what it will cost to keep the plant running. Well-maintained equipment with service records supports the multiple, while machines overdue for replacement are deducted from the price or lower the multiple.
Yes. If one customer provides a large share of revenue, losing it would hit the buyer hard, so buyers lower the multiple, ask for part of the price to depend on that customer staying, or walk away. A written supply agreement with that customer reduces the discount.
It depends on the buyer pool. Selling the business alone, with a new lease to the buyer, keeps the price within reach of more buyers, and you keep the property as an investment. Selling both suits buyers who want to own their premises. Either way, a secure lease or a clear property option supports the business price.
Often 6 to 12 months from listing to settlement. Due diligence on equipment, stock, customers and compliance takes longer than in most industries, and buyer finance can add time. See how long it takes to sell a business.
For a sale, a broker’s appraisal of market value is usually enough to set the asking price, often alongside a separate plant and equipment valuation. A formal valuation is needed for lending, family law, partnership disputes, tax or stamp duty purposes. See the difference between a valuation and an appraisal.
Selling a manufacturing business
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This guide is general information, not financial, legal or tax advice. Every business is different, so speak to a broker, valuer or accountant before setting a price.
Sources: Business Queensland, valuing a business to buy or sell; business.gov.au, sell your business; IP Australia. Checked 11 October 2026.
