What Is My Business Worth in Australia? | IBV™

An operating business, a collection of assets and a parcel of company shares are different subjects. A valuation for sale planning may also have different instructions from a valuation supporting a shareholder exit or tax matter. Specify the subject, purpose and valuation date before comparing figures.

Ask three questions: Which entity earns the income? Which assets and obligations are included? Whose interest is being valued? Premises owned outside the trading entity, shareholder loans and restricted ownership rights can change the answer. A headline “business value” without those boundaries may not describe what you own or intend to sell. The appropriate basis of value also depends on the purpose of the valuation and the interest being assessed.

A profit stream tied to one customer, one supplier or one owner is different from a diversified operation with documented systems. Consider both the likelihood of disruption and the cost of responding to it.

Evidence worth examining includes:

These are not automatic percentage deductions. Their significance depends on the business, the valuation basis and the evidence. The useful question is how each issue affects maintainable earnings, future cash flows or the risk attached to them.

Goodwill may arise from an established customer base, reputation, systems or other advantages supporting future economic benefits. But a relationship attached personally to the owner may not transfer in the same way as a business-owned contract or functioning team.

Imagine two otherwise similar firms: one routes all enquiries, quoting and delivery through its founder; the other has experienced staff, documented processes and customer relationships held by the firm. This is a qualitative illustration, not a priced case study. It shows why similar past profits do not necessarily imply equal transferability.

Do not assume goodwill is an extra amount to add after valuing an earnings stream. An earnings-based conclusion may already reflect the economic benefits associated with goodwill and operating assets. The treatment must be explained to avoid counting the same value twice.

Consider two fictional businesses that each report $250,000 EBITDA. These numbers are made up for explanation, not extracted from a client report. Business A's accounts already include the full cost of management performed by employees. Business B depends on an owner whose recorded remuneration is assumed to be $60,000 below the supported full cost of replacing those duties. With all other adjustments set aside for this illustration, B's adjusted earnings become $190,000, while A remains at $250,000. The additional $60,000 represents replacement management costs not already included in Business B's reported EBITDA, so the adjustment does not double count anything already recognised.

That is a difference in the earnings available after necessary work is paid for—not an automatic $60,000 difference in business value. A valuation still needs an appropriate method and evidence. It would be misleading to apply a generic multiplier to both recorded figures and declare the businesses equally valuable.

Now consider transferability separately. Assume A's recurring work is held under business contracts, while B's customers depend on personal introductions and have not agreed to stay after an ownership change. Those hypothetical facts require investigation of retention, contract rights and transition costs. They do not justify inventing a standard goodwill discount. Equally, A's contract renewal terms could expose risks that its headline profit conceals.

Use the comparison to ask better questions: Which duties must be replaced? What does replacement actually cost? What evidence supports customers remaining? Read the worked earnings and equity examples for the arithmetic behind these distinctions. The outcome for your business depends on its own records, rights and instructed valuation basis.

Prepare a short evidence pack: financial statements across relevant periods, current management accounts, debt and asset schedules, ownership details, major contracts and a description of your own role. Explain material changes rather than sending only your strongest trading year.

Then identify the decision you need to make. Is it sale readiness, an ownership exit, succession planning or an adviser-defined tax requirement? That decision determines how much analysis and reporting is appropriate. For a sale, selling-a-business valuations can be scoped around the proposed transaction.

A calculator or rule of thumb can prompt questions, but it cannot verify accounts, read every agreement or test the business’s transferability. This article does not provide an automated valuation or a numerical industry benchmark. For a consequential decision, request a documented assessment with clear assumptions and limitations. Current Fixed Professional Fees should be checked against the proposed scope.

This article is general information, not a valuation of your business or legal, financial or tax advice. Confirm the purpose and intended use with the relevant adviser.