How Do You Value a Private Company?
Private companies are valued using earnings-based methods (capitalisation of future maintainable earnings, DCF), asset-based methods (net asset value), and market-based methods (comparable private transactions). Key adjustments include discounts for lack of marketability (15-35%), minority interest discounts, and control premiums — reflecting the illiquidity and ownership characteristics unique to private businesses.
Why Private Company Valuations Are Different
Unlike publicly listed companies with a market-determined share price, private companies have no observable trading price. Their shares are illiquid, financial information is not publicly available, and there is typically a much smaller pool of potential buyers. These factors fundamentally change the valuation approach.
Private company valuations must also address the specific characteristics of the ownership interest being valued. A controlling interest is worth more than a minority interest. A freely transferable interest is worth more than one subject to restrictions. And the lack of a public market means applying appropriate discounts for illiquidity.
Our Brisbane valuers have extensive experience with private company structures common in Queensland — family-owned businesses, private groups with multiple entities, professional partnerships, and joint ventures.
Key Valuation Adjustments for Private Companies
Accurate private company valuations require specific adjustments that are not relevant for publicly traded businesses.
Discount for Lack of Marketability (DLOM)
Private company shares cannot be sold on a stock exchange. This illiquidity reduces their value compared to equivalent public company shares. DLOMs typically range from 15-35% depending on the company's size, profitability, and the likelihood of a future liquidity event.
Minority Interest Discounts
A minority shareholding lacks the ability to control business decisions, set dividends, or force a sale. Minority discounts of 15-30% are common, though the specific discount depends on the rights attached to the shares and any shareholder agreement protections.
Control Premiums
Conversely, a controlling interest commands a premium because the holder can direct the business, set strategy, and determine distributions. Control premiums typically range from 20-40% above minority value.
Key-Person and Size Adjustments
Private companies, especially smaller ones, are often more dependent on key individuals and face higher risk due to their size. These factors are reflected through higher capitalisation rates or specific risk premiums in the valuation model.
Finding Comparable Data for Private Companies
One of the biggest challenges in private company valuation is the limited availability of comparable transaction data. Unlike public markets with transparent pricing, private deal terms are often confidential.
We overcome this challenge through access to private transaction databases, industry knowledge built over hundreds of valuations, relationships with business brokers and advisers who share de-identified deal data, and published industry surveys that provide reliable benchmark multiples for Queensland and Australian private businesses.
Key Benefits
How It Works
1Structure Assessment
We analyse your ownership structure, shareholder agreements, and the specific interest being valued to determine appropriate adjustments.
2Financial Analysis
Comprehensive review and normalisation of financial statements, with adjustments for private company-specific items.
3Methodology & Discounts
Application of appropriate valuation methods with carefully considered marketability and minority/control adjustments.
4Defensible Report
Detailed report documenting the rationale for all adjustments and discounts, ready for any third-party review.
Common Questions About Business Valuation
People Also Ask
A private company is typically worth 20-40% less than an equivalent public company due to the illiquidity discount. However, well-managed private companies with strong earnings, growth prospects, and clear exit paths command narrower discounts.
Our valuation services →Yes, but banks typically apply significant haircuts (discounts) to private company shares when used as collateral due to their illiquidity. An independent valuation is usually required, and the lending value may be 40-60% of the appraised value.
Valuation for loans →For tax, compliance, and shareholder agreement purposes, valuations should be updated every 2-3 years or when significant events occur (major contracts, ownership changes, market shifts). Annual valuations are recommended for ESS and financial reporting.
Contact us →Related Guides
Related Valuation Methods
Related Industry Valuations
Ready to Get Started?
Speak with our Brisbane valuation experts today. Free initial consultation with no obligation.