Owners searching how to value a business usually want one thing: a number they can trust. Most guides online skip the actual maths. This one doesn’t.

Below, you’ll find the four core valuation methods, worked examples with real numbers, and the industry multiples commonly used across Queensland, New South Wales and Victoria business sales. Gold Coast Business Brokers has sold businesses right across Queensland, New South Wales, and Victoria to bring you this guide.

Why “How to Value a Business” Doesn’t Have One Simple Answer

Search this question online and you’ll find calculators promising an instant figure. Type in your revenue, click a button, get a number. It feels precise. It’s not.

Two businesses in the same industry, with identical revenue and profit, can sell for very different amounts. Customer concentration, management depth, and recurring revenue all shift the outcome. A formula gives you a starting point. It doesn’t give you the final answer.

That said, understanding the formulas matters enormously. They tell you what buyers actually look at, and they let you spot which levers you can still pull before you sell.

Method One: Earnings-Based Valuation Using SDE or EBITDA

This is the method buyers reach for first, and the one worth understanding properly.

What SDE and EBITDA Actually Mean

For smaller owner-operated businesses, valuers usually calculate Seller’s Discretionary Earnings, or SDE. This starts with net profit and adds back the owner’s salary, personal expenses run through the business, and any one-off costs.

For larger businesses with a management team already in place, valuers switch to EBITDA: earnings before interest, tax, depreciation, and amortisation. The difference matters because EBITDA assumes a manager gets paid a market salary. SDE assumes the owner works in the business unpaid.

The Formula

The basic calculation looks like this:

Business Value = Earnings (SDE or EBITDA) × Industry Multiple

Worked Example

Take a professional services business earning $180,000 in net profit. The owner adds back their own $90,000 salary, plus $15,000 in personal vehicle expenses run through the books. That gives an SDE of $285,000.

Assuming the business requires a full time working owner, we could apply a multiplier of between 1x and 1.5x SDE, depending on contracts, staff, and equipment. This business values at $285,000 to $427,500 as a base number.

Change the multiple by half a point in either direction, and the value shifts by more than $140,000. That’s why the multiple matters as much as the earnings figure itself.

Method Two: Asset-Based Valuation

This method suits businesses where physical assets carry real weight: manufacturers, equipment-heavy trades, or businesses with substantial stock.

The Formula

Business Value = Total Assets − Total Liabilities

You value each asset at fair market value, not book value. A ten-year-old delivery van sitting on the books at $2,000 might genuinely be worth $8,000 on the open market, or considerably less if it needs major repairs.

Worked Example

A small manufacturing business owns equipment worth $420,000, stock worth $95,000, and a vehicle fleet worth $60,000. Total assets: $575,000. The business owes $180,000 across a business loan and outstanding supplier invoices.

$575,000 minus $180,000 leaves a value of $395,000.

This method ignores goodwill entirely. A profitable business with loyal customers and strong margins is worth more than its asset value alone. That’s precisely why asset valuation suits some businesses and badly undersells others.

Method Three: Capitalisation of Future Maintainable Earnings

This method estimates ongoing sustainable profit, then divides it by a required rate of return.

The Formula

Business Value = Future Maintainable Earnings ÷ Capitalisation Rate

The capitalisation rate reflects risk. A stable, well-established business might use a rate around 15% to 20%. A newer or higher-risk business might need a rate of 30% or more, since the buyer expects a faster payback for taking on more uncertainty.

Worked Example

A professional services firm has averaged $200,000 in adjusted net profit over the past three years, with steady growth and low client turnover. A valuer applies a 20% capitalisation rate.

$200,000 divided by 0.20 equals a valuation of $1,000,000.

Push that capitalisation rate up to 25% to reflect more risk, and the same earnings produce a valuation of $800,000. The rate you choose changes the outcome dramatically, which is exactly why this figure needs genuine market judgement, not a guess.

Method Four: Comparable Sales

This method looks at what similar businesses actually sold for, not what they’re listed for.

Asking prices mean very little. Plenty of businesses list high and sell considerably lower after negotiation. Genuine comparable data comes from completed sales, ideally within the last twelve to eighteen months, in a similar location and size bracket.

This is where working with an active broker matters. Brokers see completed sale prices other owners never do, because that information rarely gets published anywhere publicly.

Indicative Industry Multiples Across Australia

The table below shows typical ranges observed in the Australian market. Treat these as a starting point, not a guarantee.

A business sitting at the bottom of its range usually carries higher owner dependency, thin margins, or weak records. A business at the top usually shows recurring revenue, low customer concentration, and management depth beyond the owner.

What Actually Moves You Within the Range (or Outside this Range!)

Two businesses in the same industry, with the same revenue, can land at very different points in these ranges. A handful of specific factors explain most of the gap.

Customer concentration matters most. If no single client accounts for more than 10% to 15% of revenue, that’s not usually a problem. Push past 20% to 25% from one client, and buyers typically knock 0.5x to 1x off the multiple. Push past 40% from your top three clients combined, and the discount can reach 1x to 2x.

Recurring revenue adds real premium. Research across multiple markets shows contracted or subscription-style revenue can add anywhere from 15% to over 50% to a multiple, depending on the industry.

Owner dependency works the other way. A business that needs the owner physically present every day sits at the bottom of its range, regardless of how strong the profit looks on paper.

Checklist: Preparing the Numbers for Your Own Valuation

• Calculate your SDE or EBITDA using three years of financial data, not just the latest year
• Add back your own salary, personal vehicle costs, and any one-off expenses correctly
• Get a fair market valuation for equipment, stock, and vehicles, not book value
• Check customer concentration: does any client exceed 15% of revenue?
• Identify how much revenue is contracted or recurring versus one-off
• Compare your business against the industry multiple range above, honestly
• Get three years of financials reviewed by an accountant before you rely on any figure

Where Capital Gains Tax Fits Into Valuation Timing

Your CGT position doesn’t change what a buyer pays. It does change how much of that payment you keep, and that affects when you should sell.

The ATO’s small business CGT concessions can significantly reduce your tax bill, provided you meet strict eligibility conditions around turnover and active asset use. From 1 July 2027, the general 50% CGT discount changes for many assets, replaced by an indexed discount and a new minimum tax rate. The small business concessions themselves remain in place, and one key threshold actually widens in sellers’ favour.

None of this affects your valuation directly. It does mean the timing of your sale, relative to your own tax position, deserves a proper conversation with your accountant.

Common Mistakes Owners Make When Valuing Their Own Business

A handful of errors show up constantly in owner-prepared valuations, and each one skews the number significantly.

Owners often forget to add back their own salary when calculating SDE, understating true earnings by tens of thousands, if not millions, of dollars. Others apply a multiple pulled from a generic online calculator, without checking whether their specific industry and risk profile actually matches that range.

Some owners value assets at depreciated book value rather than fair market value, understating an asset-heavy business considerably. Others ignore customer concentration entirely, missing a factor that can shift the multiple by a full point or more.

Every one of these mistakes gets caught during a proper valuation process, provided you commission one early enough to actually act on the findings.

Formal Valuation, Accountant, or M&A Firm — Who Should You Ask?

Larger transactions, particularly those involving multiple entities or cross-border buyers, often bring in a corporate advisory or M&A firm to run a formal valuation process. That level of engagement makes sense at that scale.

Most small and mid-sized business sales don’t need it. The fees attached to a full M&A engagement can eat into a meaningful share of the sale proceeds, on a transaction where a business broker delivers the same core outcome at a fraction of the cost.

An accountant brings genuine expertise in financial reporting and can confirm your earnings figures accurately. What most accountants don’t have is live visibility into comparable sale prices, because that information sits in active deal files and recent negotiations, not in published data. A business broker working weekly with buyers and completed transactions brings exactly that missing piece.

Getting a Valuation You Can Actually Rely On

Every method above requires judgement a formula alone can’t supply. The multiple, the capitalisation rate, and the comparable sales data all depend on genuinely current market conditions, not a static number pulled from a table.

Gold Coast Business Brokers has connected thousands of business owners with buyers across Queensland, New South Wales, and Victoria. We combine the formulas in this guide with live transaction data most owners never see, to produce a price guide grounded in what buyers are actually paying right now.

If you’re wondering how to value your business accurately, before listing or simply for planning purposes, the smartest next step is a confidential conversation with someone who values businesses every week.

Request a confidential market appraisal and find out what your business is genuinely worth in today’s market.