How much is my business worth?
The short answer
Most Australian small and medium businesses are worth their normalised annual EBITDA multiplied by a figure between 2.0 and 5.0, cross-checked against net asset backing. A business earning $500,000 after the owner is paid a market wage is therefore commonly worth $1m to $2.5m.
Start with earnings, not turnover
Turnover tells you almost nothing about value. Two businesses turning over $3m can be worth $400,000 and $2m depending on what they earn and how durable those earnings are. The starting figure is EBITDA — earnings before interest, tax, depreciation and amortisation — for the most recent completed year, with three years reviewed.
Normalise the earnings first
Reported profit in an owner-operated business is not what the business earns. Your salary has to be restated to what a replacement manager would cost, related-party rent brought to market, personal expenses removed and genuine one-off items added back. In owner-operated businesses this typically moves earnings 20 to 40 per cent, in either direction.
The multiple prices risk, not the industry
A multiple is a price for how durable and transferable the earnings are. The sector sets a band; owner dependence, recurring revenue, customer concentration, earnings trend and capital intensity decide where in that band you sit. A well-run business in a low-multiple sector routinely beats a fragile one in a high-multiple sector.
Then bridge to what you actually receive
The multiple gives enterprise value. What reaches you is enterprise value less interest-bearing debt, plus surplus cash and non-operating assets, adjusted to a normalised working capital position. Owners are frequently surprised by the gap, and it is worth understanding before you negotiate.
The numbers
What normalised EBITDA is worth at each multiple
Enterprise value at common multiples, before the debt and surplus asset bridge. Use it to orient, not to price.
Scroll the table sideways →
| Normalised EBITDA | At 2.5× | At 3.5× and 4.5× |
|---|---|---|
| $250,000 | $625,000 | $875,000 and $1.13m |
| $500,000 | $1.25m | $1.75m and $2.25m |
| $750,000 | $1.88m | $2.63m and $3.38m |
| $1,000,000 | $2.5m | $3.5m and $4.5m |
| $2,000,000 | $5.0m | $7.0m and $9.0m |
Orientation only. Larger businesses generally attract higher multiples than the band shown; very small owner-operated businesses generally attract lower, and some are worth little more than the market value of their equipment.
Caveats
What would change this answer for your business
Four things move a business more than any other within its band, and three of them are inside your control.
Who answered this
Prepared by the valuation team at Business Valuations Brisbane, the business valuation division of Asset Valuations Group. Every report we issue is signed by a Certified Practising Valuer of the Australian Valuers Institute. General information only — not advice on your specific circumstances.
- Whether it runs without you The single largest swing factor. Moving from owner-run to manager-run is routinely worth a full turn of EBITDA — on $500,000 of earnings, roughly $500,000 of value.
- How much revenue is contracted Above roughly 50 per cent recurring or contracted revenue prices at the top of any sector band, because that revenue survives the change of ownership.
- Customer concentration One customer above 30 per cent of revenue is a discount in every sector. Buyers model losing them and value what remains.
- What your assets are actually worth Net asset backing sets a floor. In asset-heavy businesses the plant, valued at market rather than book, sometimes exceeds the earnings-based figure entirely.
Reviewed by a Certified Practising Valuer
Reviewed by Jarrad Khoury, Director and Head of Valuations — Registered Valuer (QLD, Not Limited), Licensed Valuer (WA, Not Limited), CPV and CBV. Published by Business Valuations Brisbane, the business valuation division of Asset Valuations Group.
Last reviewed
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