Business valuation guide
Most small and medium businesses in Australia sell for 1 to 5 times their adjusted profit, plus stock at value. The multiple reflects how much risk a buyer takes on: how reliable the profit is, how much depends on the owner, and how easily the business could be replaced.
The basics
For most businesses that sell for under about $5 million, value comes down to two numbers: the profit a new owner can expect to make, and a multiple that reflects how safe that profit is.
Brokers usually work from PEBITDA: 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. Where the business is run by a manager, or the buyer is an investor, brokers use EBITDA instead, with a market salary for every role.
The result is the price for the business as a going concern: its goodwill, plant and equipment. Saleable stock is counted at settlement and added on top.
| Net profit per the accounts | Start |
|---|---|
| + Add-backs | Adjust |
| Adjusted profit | PEBITDA |
| × Multiple | Risk |
| Value of the business | Goodwill and equipment |
| + Stock at value | At settlement |
A lower multiple means more risk for the buyer, not a worse business. A 2x multiple means the buyer expects to earn back the price in about two years of adjusted profit.
The method
Profit and loss statements, balance sheets, tax returns and BAS. Buyers look at the trend, not just the last year.
Add back one working owner's wage, depreciation, interest, genuine one-off costs and personal expenses run through the business. The business terms glossary explains each term.
Start from the multiples by industry below, or the guide for your industry.
Move up the range for growing profit, a long lease, contracts and a team that runs without you. Move down for owner reliance, a short lease or a few big customers.
Add saleable stock at cost. Then check the price against what a buyer would earn on their money, and against the value of the assets.
Worked example
Established for 12 years, 40 staff, contracts with offices and schools, owner works full time managing the business. Figures are illustrative.
| Net profit per the accounts | $180,000 |
|---|---|
| + Owner's wage (one working owner) | $90,000 |
| + Depreciation | $35,000 |
| + Interest on vehicle loans | $12,000 |
| + One-off legal costs | $18,000 |
| + Owner's private car costs | $8,000 |
| Adjusted profit (PEBITDA) | $343,000 |
| Multiple (contracted service business) | 2.2x to 2.8x |
| Indicative price range | $754,600 to $960,400 |
| Plus stock (consumables) | at settlement |
Return check: at $857,500 (2.5x), a buyer who steps into the owner's role keeps $253,000 a year before tax, about a 30% return on the price.
Adjusting profit
Add-backs turn the profit in your tax return into the profit a new owner would make. Every one needs evidence, because the buyer’s accountant will check them line by line.
Typical multiples
Each industry has its own range, because each carries different risks. These are the ranges from our industry guides, which explain what puts a business at the top or bottom of its range and include a worked example.
| Industry | Typical multiple | What matters most |
|---|---|---|
| Cafes and coffee shops | 1x to 3x | Lease length, owner hours, coffee volume. |
| Restaurants and bars | 1x to 3.5x | Lease, licence, chef and manager in place. |
| Beauty and hair salons | 0.8x to 3x | Who the clients belong to, rebooking, chair rental. |
| Franchises | 1x to 3.5x | Brand, remaining term, required refurbishments. |
| Consulting and professional services | 0.5x to 4x | Client ties to the founder, recurring work, team. |
| Construction and trades | 1x to 4.5x | Work in hand, licences, maintenance contracts. |
| Ecommerce and online | 1.5x to 4.5x | Traffic you own, repeat customers, own brand. |
| Childcare centres | 1.5x to 4.5x | Occupancy, rating, lease and rent. |
| Manufacturing and engineering | 1.5x to 5x | Plant condition, customer spread, capital spending. |
Valuation methods
Most valuations use one main method and one or two others as checks. The right one depends on the size of the business, how it earns its money and why the valuation is needed.
| Method | How it works | Best for | Watch out for |
|---|---|---|---|
| Multiple of adjusted profit | Adjusted profit × an industry multiple. | Owner-run businesses, the majority of sales under $5 million. | Add-backs need evidence. |
| EBITDA multiple | Earnings before interest, tax, depreciation and amortisation × a multiple, with a market salary for every role. | Managed businesses and investor buyers. | Ignores capital spending the business needs. |
| Revenue multiple | Annual turnover × a multiple. | Fast-growing businesses, or as a cross-check. | Ignores margins, so it can overvalue thin-margin businesses. |
| Discounted cash flow | Forecast cash flows discounted back to today at a rate that reflects risk. | Larger businesses, long contracts, formal valuations. | Small changes to forecasts move the result a lot. |
| Asset value | Market value of equipment, stock and other assets, less liabilities. | Asset-heavy or low-profit businesses. Sets the floor for any price. | Misses goodwill in profitable businesses. |
Check the price two ways. First, the buyer’s return: adjusted profit less the owner’s wage, divided by the price. Small business buyers usually expect well above what a term deposit or property would pay, because the risk is higher. Second, the asset floor: a profitable business should sell for more than its equipment and stock would fetch.
Buyer checklist
Two businesses 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.
More on the lease side: selling a business with a lease.
Getting a number
The right option depends on why you need the number. Selling needs a figure buyers will accept. Tax, family law and disputes need a figure that will stand up to scrutiny.
| Option | What you get | Use it for |
|---|---|---|
| Online calculator | A rough range based on a few inputs. | A first idea of value. It cannot see your lease, contracts or risks. |
| Broker's appraisal | An opinion of market value based on recent sales and what buyers are paying now. | Setting an asking price and planning a sale. |
| Formal valuation | A detailed written report by a qualified valuer, with the method and evidence set out. | Tax and capital gains, family law, partnership disputes, stamp duty and lending. |
Valuations for tax. The ATO may need a market valuation for things like transfers between related parties or small business capital gains tax concessions. It says valuations by professional valuers are more credible, and they must be objective and supported by evidence. See the ATO guide to market valuation of assets, and our explainer on the difference between a valuation and an appraisal.
Before you sell
Value comes from two things: more provable profit, and less risk for the buyer. At a 2.5x multiple, every extra $20,000 of provable profit adds $50,000 to the price. Reducing risk can lift the multiple itself, which adds to every dollar of profit. Start 12 to 24 months before you plan to sell.
Planning further ahead? Our exit planning guide sets out the timeline.
Common mistakes
An overpriced business sits on the market, and a business that has been listed for a long time is harder to sell at any price. Most pricing mistakes come from valuing the business as the owner sees it, not as a buyer does.
See how long it takes to sell a business when it is priced right.
Know your number
Our brokers value businesses against real sales data from 27+ years of business sales. Confidential and no obligation.
FAQs
Most small and medium businesses sell for 1 to 5 times adjusted profit, plus stock. Small owner-operated businesses usually sit between 1 and 3 times. Larger businesses with a management team, contracts or recurring revenue reach the upper end. The range for your industry is a better starting point than an overall average.
Start with net profit from your accounts. Add back one working owner’s wage, depreciation, interest, genuine one-off costs and personal expenses paid by the business. Each add-back needs evidence. Income that was not declared cannot be added back.
Goodwill is usually what is left after the value of plant, equipment and stock is taken from the price. It is not valued on its own, but through the multiple: goodwill that belongs to the business, such as its name, location, systems and contracts, supports a higher multiple than goodwill tied to the owner.
Only if it makes little profit, or holds valuable equipment or property. For a profitable business, an asset value misses the goodwill and undervalues it. Asset value is best used as the floor for any price.
They give a rough range from a few inputs, which is useful as a first idea. They cannot see your lease, contracts, customer spread, staff or the state of your accounts, so the result can be well above or below what a buyer will pay.
For a sale, a broker’s appraisal of market value is usually enough to set the asking price. A formal valuation is needed for tax, family law, partnership disputes, stamp duty and some lending. See the difference between a valuation and an appraisal.
A broker’s appraisal usually takes a few days to a couple of weeks once your financial records are in. A formal valuation typically takes two to four weeks, depending on the size of the business and how quickly records are provided.
Usually not. Saleable stock is counted at settlement and paid at cost, on top of the price. Aged or damaged stock is discounted or excluded. Some smaller businesses sell walk-in walk-out (WIWO), with stock included. See selling a business that carries stock.
Valuing and selling
By industry
Business valuations near you
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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: ATO, market valuation of assets and small business benchmarks; Business Queensland, valuing a business to buy or sell; business.gov.au, sell your business. Checked 11 October 2026.
