Why the answer is a range, not a number
Ask three buyers what your business is worth and you will get three numbers. That is not because two of them are wrong. Value depends on who is buying, why they are buying, and what they can do with the business once they own it.
A competitor buying for market share values it differently from a private buyer who wants a job, or an investor who wants a return without turning up on Monday. Each of them is paying for a different future.
Your job as a seller is to understand how each type of buyer thinks, then present a business that scores well on the things they care about. Most of this guide is about exactly that.
Business valuation methods buyers use
Most buyers and advisers lean on a few standard approaches, often using more than one and comparing the results. None of them is magic. They are different ways of answering the same question: what will this business earn for me, and how sure can I be?
For most owner-run Queensland businesses, the earnings approach does the heavy lifting. Buyers look at what the business reliably earns once the owner's quirks are stripped out, then decide how confident they are that those earnings will continue. Confidence sets the multiple. Profit times confidence is the price.
The numbers themselves vary by industry, size and market conditions, and they change over time. That is why we do not publish multiples. A real valuation uses current evidence, not a figure from a blog post.
- Earnings-based: adjusted, sustainable profit multiplied by a factor that reflects risk and growth
- Market comparison: what similar businesses have recently sold for, adjusted for differences
- Asset-based: the net value of what the business owns less what it owes, common where earnings are weak or assets dominate
- Discounted cash flow: forecast future cash flows brought back to today's value, more common for larger or high-growth businesses
- Rules of thumb: industry shortcuts, useful as a sanity check and for little else
What moves the number up or down
Two businesses with the same profit can sell for very different prices. The difference is almost always risk. Buyers pay more for a business they believe will keep performing after the founder leaves, and less for one that might not.
Everything on the list below is a proxy for that one question. The more of these you can answer well, the more a buyer can finance, the more buyers you attract and the stronger your position in the negotiation.
Notice that none of them are about the tax return. A buyer is reading your business, not your lodgement.
- Owner dependence: can it run without you for a month?
- Customer concentration: does one client make up a scary share of revenue?
- Quality of records: clean, current, reconciled Xero files with monthly management accounts
- Revenue type: recurring and contracted versus one-off and lumpy
- Systems and documented processes: can a new owner follow the playbook?
- Trend: growing, flat or declining over the last three years
- Key staff and key contracts: are they staying, and are they in writing?
- Structure: a clean entity a buyer can purchase without inheriting your history
The first five things to fix before a sale
If a sale is on the horizon, these five are where we usually start. Most of them take months, not weeks, which is why starting early matters. A year or two of runway turns a tidy-up into a real increase in value.
None of these are accounting tricks. They are good management that happens to be visible to a buyer. A business that does them is also easier and more enjoyable to run in the meantime, which is a nice side effect.
- Get the books clean and current: reconcile everything, run monthly management accounts, take personal expenses out and explain any one-off items
- Reduce owner dependence: delegate client relationships, document how things are done, take a real holiday and see what breaks
- Lock in revenue: written contracts, retainers and clear terms turn hope into something a buyer can read
- Spread the customer base: fewer eggs in fewer baskets lowers the risk a buyer prices in
- Tidy the structure: the right entity, no mixed personal assets, clear ownership of IP and equipment, so a buyer can buy the business or the shares cleanly
From a rough number to a real valuation
If you want a feel for how profit, growth and risk interact, our illustrative exit-value calculator is a safe place to play. It is a sandbox, not a valuation, and it will not tell you what your business is worth. It will show you which levers matter most, which is often the more useful thing to know early on.
A real valuation involves adjusted earnings, current industry evidence, a review of the risks above and an understanding of who the likely buyers are. We do that work as part of Mergers, Acquisitions & Exit Planning, ideally a year or more ahead of a sale so there is time to act on what we find.
This guide is general information only, not advice. Your circumstances, your industry and the ATO's current rules on the tax side of a sale all apply.
Questions we get asked
How do I value a small business in Australia?
Most small business valuations in Australia start with adjusted earnings: the profit the business reliably makes once owner-specific costs and one-off items are removed. That figure is then multiplied by a factor reflecting risk and growth, and cross-checked against recent sales of similar businesses and the value of the net assets. An adviser combines those views into a range.
What is a business worth if it makes no profit?
Generally, a business without sustainable profit is valued on its assets, its customer list or its strategic value to a specific buyer rather than on earnings. That can still be meaningful, especially where there is equipment, stock, contracts or intellectual property. But the pool of buyers is smaller, and the price usually reflects what they can do with it rather than what it does now.
Does the value include stock, equipment and the premises?
It depends on the method and the deal. An earnings-based value usually assumes the equipment needed to run the business comes with it, while stock is often valued separately at completion. Property is typically dealt with on its own, either sold alongside the business or kept and leased to the buyer. Getting this clear early avoids arguments later.
How long before selling should I get a valuation?
Ideally a year or two before you plan to go to market. A valuation that early does two things: it gives you a realistic range instead of a hopeful one, and it shows which risks are costing you the most. That leaves time to clean up records, reduce owner dependence and tidy the structure before a buyer looks.
Do I need a valuation if I am not selling?
Often, yes. Bringing in a business partner, buying one out, succession planning within a family, restructuring into a group, setting up a buy-sell agreement or arranging insurance can all require a defensible value. It is also a useful management tool: knowing what moves the number helps you run the business better whether or not you ever sell.
Why do buyers value my business lower than I do?
Owners price in the years of effort and the potential they can see. Buyers price in risk: what happens when you leave, whether customers stay, whether the numbers are as clean as they look. The gap closes when you reduce those risks and document the potential in a form a buyer can verify, rather than asking them to take it on faith.
