Most owner-run businesses in Australia are valued on net profit, but not the figure in your tax return. Brokers start with your net profit, add back costs a new owner would not carry, then multiply that adjusted net profit by a multiple that reflects risk. Stock is usually added on top. This guide explains each step, with a worked example.
In short
Net profit is what is left after every expense, including the owner’s wage (if one is paid), interest and depreciation. That is the right figure for your tax return, but it understates what the business would earn for a new owner. Brokers adjust it so buyers can compare businesses on the same basis. For the basic definition, see what is net profit.
| Net profit | Adjusted net profit (PEBITDA) | |
|---|---|---|
| Where it comes from | Your profit and loss statement and tax return. | Net profit before tax, with add-backs. |
| Owner’s wage | Deducted, if paid. | One working owner’s wage added back, because the buyer takes your place. |
| Interest and depreciation | Deducted. | Added back. The buyer will fund and depreciate the business their own way. |
| One-off and personal costs | Deducted. | Added back, with evidence. |
| Used for | Tax and reporting. | Valuing the business for a sale. |
Where the business is run by a manager, or the likely buyer is an investor, brokers use EBITDA instead and deduct a market salary for every role, including the owner’s. See business valuations based on EBITDA.
A landscaping business with $1.2 million turnover, trading for nine years. The owner works full time in the business. Figures are illustrative.
| Amount | |
|---|---|
| Net profit before tax, per the accounts | $110,000 |
| + Owner’s wage (one working owner) | $85,000 |
| + Depreciation | $28,000 |
| + Interest on equipment finance | $9,000 |
| + One-off legal costs | $6,000 |
| + Owner’s private vehicle costs | $7,000 |
| Adjusted net profit (PEBITDA) | $245,000 |
| Multiple | 2.0x to 2.6x |
| Indicative price range | $490,000 to $637,000 |
| Plus stock (plants and materials) | At settlement |
Why the add-backs matter: at 2.3x, the profit in the tax return ($110,000) points to a price of $253,000. Adjusted net profit ($245,000) points to $563,500.
Return check: at $563,500, a buyer who steps into the owner’s role keeps $160,000 a year before tax after paying themselves $85,000. That is about a 28% return on the price.
Add-backs turn the profit in your accounts into the profit a new owner would make. The buyer’s accountant will check each one, so keep the invoices and statements that support them.
The business terms glossary explains PEBITDA, SAV and the other terms buyers use.
The multiple reflects how much risk the buyer takes on. A 2x multiple means the buyer expects to earn back the price in about two years of adjusted net profit.
| Type of business | Typical multiple |
|---|---|
| Small owner-operated business | 1x to 3x |
| Larger business with a manager, contracts or recurring revenue | 3x to 5x |
Ranges by industry: cafes, hospitality, beauty salons, franchises, consulting, construction, ecommerce, childcare and manufacturing.
Net profit is the main method for most owner-run businesses selling for under about $5 million. Other methods suit different businesses, and a valuer will often use one as a cross-check.
| Method | Best for | Read more |
|---|---|---|
| Adjusted net profit | Profitable, owner-run businesses. | This guide |
| EBITDA | Managed businesses and investor buyers. | EBITDA valuations |
| Revenue multiple | Fast-growing businesses, or as a cross-check. | Revenue multiple valuations |
| Discounted cash flow | Larger businesses with long contracts, and formal valuations. | Discounted cash flow valuations |
| Asset value | Low-profit or asset-heavy businesses. Sets the floor for any price. | How to value a business |
For a sale, a broker’s appraisal of market value is usually enough. Tax, family law and disputes need a formal valuation. See the difference between a valuation and an appraisal.
Start with net profit before tax from your accounts. Add back one working owner’s wage, depreciation, interest, genuine one-off costs and personal expenses to get adjusted net profit. Multiply that by a multiple for your industry and risk, then add saleable stock at cost.
Most small and medium businesses in Australia sell for 1 to 5 times adjusted net profit, plus stock. Small owner-operated businesses usually sit between 1 and 3 times. Larger businesses with a manager, contracts or recurring revenue reach the upper end.
Before tax. Brokers start from net profit before tax and add back interest, depreciation and one working owner’s wage. Tax depends on the buyer’s own structure, so it is left out.
Net profit is what is left after every expense. PEBITDA is profit before interest, tax, depreciation and amortisation, with one working owner’s wage added back. It shows what the business earns for an owner who works in it, which is what a buyer is paying for.
Use adjusted net profit (PEBITDA) if you work in the business and a buyer would take your place. Use EBITDA if a manager runs the business or the likely buyer is an investor, because every role then needs a market salary.
Usually not. The multiple values the goodwill, plant and equipment. Saleable stock is counted at settlement and paid for at cost on top of the price. Some smaller businesses sell walk-in walk-out (WIWO), with stock included.
On its assets. The value is based on what the equipment, fit-out and stock would sell for. A profitable business should always sell for more than its assets, which is why asset value is used as the floor for any price.
Our brokers value businesses against real sales data from 27+ years of business sales. 50+ specialist brokers in 8 offices across Australia. Confidential and no obligation.
Find a valuer near you: Brisbane, Sydney, Melbourne, Perth, Adelaide, Gold Coast, Sunshine Coast.
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: ATO, small business benchmarks and market valuation of assets; Business Queensland, valuing a business to buy or sell. Checked 13 October 2026.
