“How much is my business worth?”
It is one of the most common questions business owners ask us at Business Growth and Exit Specialists (BGES)—and one of the most important.
For many owners, their business represents years or even decades of hard work. It may also be their largest personal asset and an important part of their retirement plan.
Yet many owners do not know what their business is worth. Others have a figure in mind based on what they need to retire, what they have invested or what they have heard another business sold for.
Unfortunately, a buyer does not determine value based on how hard you have worked or how much you hope to receive. The value is based on the sustainable financial returns the business can generate and the level of risk a buyer will be taking.
A professional business valuation gives you a more realistic understanding of what is the value of your business and what the market may pay today. Just as importantly, it can show you what needs to improve to increase that value in the future.
Why many business owners misunderstand value
A common mistake is assuming that revenue equals value.
An owner might say:
“We turn over $2 million a year, so the business should be worth around $2 million.”
It does not usually work that way.
Revenue tells a buyer how much the business revenue is. It does not tell them how much profit it makes, how reliable that profit is or how much risk is involved in maintaining it.
Buyers generally pay for sustainable and transferable earnings. In plain English, they want confidence that the business will continue to generate profit after the current owner leaves.
Consider two businesses that each generate $400,000 in annual profit.
The first has:
- A capable management team;
- Recurring customers;
- Well-documented systems;
- Reliable financial information;
- Consistent margins; and
- Limited dependence on the owner.
The second relies on the owner to win customers, manage staff, approve decisions and solve most operational problems.
Although the reported profit may be the same, the first business is likely to attract more buyers, a higher valuation multiple and better sale terms.
Understanding your business value therefore means looking beyond what you earn. You must also consider how the profit is generated, whether it can continue and how dependent the business is on you. Your business risks and drivers.
How are businesses valued in Australia?
There is no single valuation method suitable for every business.
The appropriate method depends on the industry, size, financial performance, assets, growth prospects, risk profile and purpose of the valuation.
Common methods used for SME business valuations in Australia include the following.
Capitalisation of earnings or EBITDA multiple
This is one of the most common approaches for profitable established businesses.
EBITDA means earnings before interest, tax, depreciation and amortisation. It provides a starting point for assessing the operating earnings of a business before its financing structure and certain accounting charges.
Before applying a multiple, the earnings usually need to be normalised. This may involve adjusting for:
- One-off income or expenses;
- Personal expenses paid through the business;
- Owner wages above or below a commercial market rate;
- Related-party transactions;
- Unusual legal or professional costs; and
- Income or expenses that are unlikely to continue.
A valuation multiple is then applied to the maintainable earnings.
For example, if a business has maintainable EBITDA of $500,000 and an appropriate multiple of four, its indicative enterprise value would be:
$500,000 × 4 = $2 million
However, the multiple should never be selected simply because it produces the number the owner wants.
It must reflect market evidence and the risks and strengths of the individual business. Industry, scale, recurring revenue, customer concentration, management capability, growth and owner dependency can all affect the multiple.
Published market commentary sometimes refers to SME EBITDA multiples ranging from approximately two to six times earnings. This is only a broad guide—not a rule. Smaller, riskier or highly owner-dependent businesses may attract lower multiples, while larger and better-quality businesses may attract higher multiples.
Capitalisation of future maintainable earnings
For some smaller businesses, valuers may use adjusted profit or future maintainable earnings rather than EBITDA.
The objective is to determine the level of earnings a buyer could reasonably expect the business to maintain under normal ownership.
This method is often relevant where the owner works in the business and adjustments are required for a commercial salary.
Discounted cash flow
A discounted cash flow, or DCF, valuation estimates the future cash flows the business is expected to generate and converts them into a present value.
This method can be useful for larger, growing or more complex businesses with reliable financial forecasts. However, the result can be highly sensitive to assumptions about future growth, margins, investment requirements and risk.
A forecast is not automatically a valuation. It must be realistic, supported by evidence and tested against different scenarios.
Asset-based valuation
An asset-based valuation looks at the value of the underlying assets and liabilities of the business.
This approach may be more relevant for asset-intensive businesses, such as manufacturing, transport, construction, equipment hire or property-related operations.
It is generally less suitable as the primary method for profitable service businesses where most of the value comes from customers, people, systems, intellectual property and goodwill.
Market-based valuation
A market-based approach considers actual sales of comparable businesses.
The challenge is that no two SMEs are exactly alike. Transaction information may also be limited or confidential. Market comparisons are useful, but they need to be interpreted carefully.
Enterprise value is not always the amount you receive
This is an important distinction that business owners can easily overlook.
A valuation based on earnings will often produce an enterprise value. This represents the value of the operating business before considering its cash, debt and certain other balance-sheet items.
To estimate the value of the owner’s shares or equity, adjustments may be required for:
- Cash retained in the business;
- Bank loans and other debt;
- Surplus or non-operating assets;
- Working capital;
- Shareholder loans; and
- Other liabilities or transaction adjustments.
For example, a business may have an enterprise value of $2 million but also carry $500,000 of debt. The value attributable to the shares may therefore be substantially lower, depending on the agreed transaction structure and other adjustments.
The final amount an owner receives can also be affected by tax, legal costs, advisory fees, working-capital requirements and the terms of the sale.
That is why it is important to clarify what a valuation figure represents rather than focusing only on the headline number.
What increases the value of a business?
While every business is different, buyers consistently look for several important qualities.
Sustainable profitability
Buyers are interested in profit, not revenue alone.
Strong and consistent margins demonstrate that the business is well managed and has a healthy business model. Improving pricing, product mix, productivity and cost control can lift earnings and increase value.
A $100,000 improvement in sustainable EBITDA could potentially add several hundred thousand dollars to business value, depending on the applicable multiple.
Recurring and predictable revenue
Contracts, subscriptions, repeat customers and other recurring income provide greater certainty.
A business that begins every month with committed revenue is usually less risky than one that must continually find new customers to maintain sales.
However, recurring revenue is most valuable when it is supported by good customer retention, appropriate contracts and strong margins.
Low owner dependency
If the business cannot operate without you, a buyer may question what they are actually purchasing.
Reducing owner dependency involves:
- Building a capable management team;
- Delegating responsibility and decision-making;
- Documenting important processes;
- Transferring key customer and supplier relationships;
- Strengthening governance and reporting; and
- Ensuring knowledge is shared across the business.
A valuable business should be able to operate successfully without the owner being involved in every decision.
A capable and stable team
Buyers want confidence that key employees will remain after the sale.
Clear roles, appropriate employment agreements, leadership development and succession planning can reduce people-related risks. A business that depends heavily on one employee can be almost as risky as one that depends entirely on its owner.
Diverse customers
Customer concentration can significantly reduce value.
If one or two customers generate a large share of revenue, losing either of them could have a major impact on profit. Buyers may reduce their offer, require stronger protections or structure part of the price as an earn-out.
A broader customer base generally makes earnings safer and more attractive.
Strong systems and reliable information
Documented processes make the business easier to operate, scale and transfer.
Buyers also expect accurate and timely financial information. They need to understand:
- Where revenue and profit come from;
- Which products, services or customers are most profitable;
- How margins have changed;
- What working capital the business requires; and
- Whether reported earnings can be verified.
Clean financial records and organised documentation can make due diligence smoother and give buyers greater confidence.
A credible growth plan
Buyers pay for current performance, but they are also influenced by future potential.
A clear and credible growth strategy can increase interest in the business, particularly where the opportunities do not depend on unrealistic assumptions or the continued involvement of the owner.
The plan should show where growth will come from, what investment is required and why the business is capable of delivering it.
What reduces business value?
The factors that commonly reduce value include:
- Heavy dependence on the owner;
- Declining or inconsistent profit;
- Poor cash flow;
- Too much revenue coming from a small number of customers;
- Weak or unreliable financial records;
- Undocumented systems and processes;
- Dependence on one or two key employees;
- Unresolved legal, tax or compliance issues;
- Short-term or informal customer contracts;
- Outdated equipment, technology or systems;
- Limited competitive advantage; and
- No credible growth or succession plan.
These issues do not necessarily make a business unsaleable. However, they can reduce the price, limit the number of interested buyers or lead to less favourable sale terms.
Business value and sale price are not always the same
A valuation provides an informed estimate of value at a particular point in time. It does not guarantee the final sale price.
The actual result will also depend on:
- The number and quality of interested buyers;
- Strategic value to a particular buyer;
- Market and economic conditions;
- The quality of the sale process;
- Negotiation;
- Deal structure;
- Due diligence findings; and
- Whether part of the price depends on future performance.
A strategic buyer may be willing to pay more because the acquisition provides additional customers, capabilities, technology, intellectual property or cost savings.
Another buyer may offer an attractive headline price but require a large earn-out, extended handover or vendor finance. The highest offer is not always the best offer once risk and payment terms are considered.
When should you have your business valued?
A business valuation should not be left until you are ready to sell.
There are several reasons to obtain one earlier:
- You are considering selling within the next two to five years;
- You want to understand whether the business can fund your retirement;
- You are developing an exit or succession plan;
- A shareholder or employee is entering or leaving;
- You are considering an acquisition, merger or restructure;
- You need to resolve a shareholder, family or legal matter;
- You want to raise capital;
- You want to measure whether your strategy is increasing value; or
- You simply want a realistic understanding of your largest asset.
A valuation completed several years before an exit gives you time to identify the value gap—the difference between what the business is worth today and what you need it to be worth when you sell.
You can then develop a practical plan to close that gap.
Why tax planning needs to start early
The tax outcome from selling a business can depend on the ownership structure, the assets being sold, the owner’s circumstances and eligibility for small business capital gains tax concessions.
Australia’s tax environment is also changing. Treasury has announced reforms intended to apply from 1 July 2027, including changes affecting the general CGT discount and certain discretionary trusts. Importantly, the government has stated that the four small business CGT concessions will remain and that gains accrued before the commencement date will receive transitional protection.
The effect will not be the same for every owner. It would therefore be unwise to rush a sale—or delay one—based only on a general headline.
How long does it take to increase business value?
Meaningful value improvement does not happen overnight.
Some improvements—such as clearer financial reporting, better pricing or stronger cost control—may produce results relatively quickly.
Others take longer, including:
- Building a management team;
- Reducing dependence on the owner;
- Diversifying customers;
- Developing recurring revenue;
- Strengthening systems;
- Establishing a record of sustainable growth; and
- Preparing the business for buyer due diligence.
In our experience, owners who begin preparing two to five years before their intended exit have far more opportunity to improve value and achieve a successful outcome.
Waiting until a buyer approaches—or until you are ready to retire—leaves much less time to deal with the issues that can reduce value.
What does a BGES business valuation involve?
At Business Growth and Exit Specialists, we help business owners across Sydney and Australia answer three important questions:
What is my business worth today?
What can I do to increase its value?
Who are my strategic buyers who will pay me more?
Our business valuation service examines more than the financial statements. Depending on the purpose and scope of the engagement, we consider:
- Historical and maintainable earnings;
- Financial trends and forecasts;
- Industry and market conditions;
- Customer and supplier concentration;
- Recurring revenue;
- Management and employee capability;
- Owner dependency;
- Systems and intellectual property;
- Growth opportunities;
- Business risks; and
- Relevant valuation methods and market evidence.
- Benchmarking with similar businesses with similar revenues
We then help the owner understand the valuation in plain English, including the factors supporting the value and the issues holding it back.
Where appropriate, we can develop a growth, value improvement and exit strategy to help close the gap between the current value and the owner’s desired outcome.
Our philosophy is simple:
Grow the business. Increase its value. Prepare for a successful exit.
Start with clarity
You cannot make an informed decision about your future if you do not know what your largest asset is worth.
A realistic business valuation can help you understand where you stand, identify risks and focus on the improvements that will create the greatest value.
It may confirm that you are on track. It may reveal a value gap that needs attention. Either way, knowing the truth now gives you more choices and more time to act.
Book a free discovery session with BGES to discuss your business, your goals and the most appropriate next step.
No pressure and no obligation—just a practical and confidential business conversation.
Eric Tjoeng, FCPA, FIML, MBA
CEO and Founder
Business Growth and Exit Specialists Pty Ltd
Ø Recognised by Digital Reference among Best Business Growth Services and Advisors in Australia for 2026
Ø Recognised among top SME Business Exit Specialist to Watch in 2025/2026 (The Enterprise World)
Ø Recognised by Digital Reference among Best Business Growth Services and Advisors in Australia for 2026
Ø Recognised among Top SME Business Advisors to Watch in 2024 (The Enterprise World)
Ø Recognised among the Top 10 Strategic Planning Services Company in Australia in 2023 (Business Management Review)
Ø Featured as Top 10 Australian Business Strategists & Experts to Watch in 2021 (Australian Business Journal)
Follow Us On