How Much Is My Business Worth? A Guide to Business Valuation in Australia
Most owners already have a number in their head. Sometimes it's what a friend got for their café. Sometimes it's the figure the business needs to sell for so retirement works. And sometimes it's simply what the years feel like they should be worth.
That number matters. But a buyer doesn't use it. A buyer asks a colder question: what will this business earn for me, and how sure can I be that it keeps doing it?
Most sales stall in the gap between those two numbers. This guide covers how businesses are actually valued in Australia, what pushes the price up or down, and how to find out where yours sits before you go to market.
There Is No Single Formula
It would be convenient if there were. There isn't. The federal government's guidance says plainly that no single valuation method exists, that several methods are often combined, and that industries tend to develop their own rules and formulas for valuing a business.
Business Queensland groups valuation into three broad approaches: market-based, income-based and asset-based. Nearly every valuation you'll see draws on at least one of them, and usually more than one.
The Income Approach: What the Business Earns
For most small businesses, adjusted net profit drives the price. When someone buys a business, they are buying its assets and the right to the earnings it may generate in the future. One of the simplest ways to see how this works is the return on investment method. The formula Business Queensland uses is net annual profit divided by the return on investment you want, multiplied by 100.
Here's how it plays out. Say a business makes an adjusted net profit of $60,000. If a buyer wants a 30% return on their money, they'll value it at $200,000. If they see more risk and want 40%, the same business is worth $150,000 to them. Nothing about the business changed. Only the buyer's confidence changed, and that one shift took $50,000 off the price. That's the core of valuation. The more certain a buyer feels about future earnings, the lower the return they need, and the more they'll pay.
Larger businesses are often valued using an earnings multiple instead. A valuer works out a normalised earnings figure, usually EBIT (Earnings Before Interest and Tax) or EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation), and applies a multiple for the industry that reflects risk, growth potential, customer concentration and market conditions.
The Adjustment Most Owners Miss: Add-Backs
Businesses are generally sold on the basis of a full-time working owner. So if you make $150,000 profit and work 50 hours a week, the business is sold as a full-time owner-operated business with an adjusted net profit of $150,000. Your own wage isn't deducted.
The good news is on the other side. Say you only work 10 hours a week, the business still makes $150,000 profit, and you pay a manager $80,000 a year to run it. If a buyer could realistically do that manager's job themselves, some of those wages can be "added back" to take the owner's hours up to a full-time 40. The adjusted net profit for a full-time working owner becomes $230,000 ($150,000 + $80,000), and a stronger price can be achieved.
Getting this right from the start is one of the fastest ways to keep a sale on track.
The Market Approach: Why We Don't Recommend It
The market approach compares your business with what similar businesses are listed or sold for. It works well for real estate, where there aren't as many variables. Businesses have far more, and many of them aren't advertised or known without due diligence.
For example, one gym making $150,000 adjusted net profit might sell for $300,000, while a second gym making the same $150,000 might sell for $175,000. The difference? The second gym has two years left on its lease with no option to renew. Buyers price it down in case they have to move the gym at the end of the lease, which will cost money.
A word of caution: asking prices and sale prices are not the same. Listings show what owners hope for. Settled sales show what buyers were willing to pay. You can browse Bonza's sold businesses to see real outcomes across different industries.
The Asset Approach: What It Owns, Less What It Owes Plus Profit
Net worth is simply what the business owns minus what it owes, plus the business's adjusted net profit for the year. This method suits asset-heavy businesses, such as manufacturing, or businesses that are being wound up.
For most owner-operated businesses, assets set the floor rather than the price. Two details catch people out. Stock is assessed at its book value rather than its retail price, with any obsolete or unsellable stock taken into account, and an asset's depreciated value can be quite different from what it would fetch on the market.
What Pushes the Price Up or Down
Two businesses with identical profits can sell for very different prices. The difference usually comes down to risk.
How much the business relies on you:
If the owner-manager or other key people are leaving, the business may be worth far less. A business that runs on systems and staff is worth more than one that runs on its owner.
The quality of your records:
A broker or adviser will ask to see up to five years of financial statements if possible, and will want to understand whether turnover and profit have gone up, down or stayed flat, and what caused any spikes.
Your lease, licences and goodwill:
Buyers and valuers look at your lease arrangements, whether your licences and permits are current, and whether your goodwill can actually transfer to a new owner.
None of this means a business has to be perfect to sell. Plenty of businesses with a hands-on owner, patchy records or a flat year still sell when they're priced realistically and presented honestly. But knowing what a buyer will look at lets you fix what you can before you list.
Don't Forget What You Actually Keep
The sale price is only half the story. What lands in your account is the other half. In Australia, four things shape that final number.
Capital gains tax:
The ATO's small business CGT concessions can let eligible owners reduce, disregard or defer some or all of a capital gain on an active asset used in the business. To be eligible, you generally need either aggregated turnover under $2 million or net assets that pass the $6 million net asset value test. There are four concessions, and the 15-year exemption can remove the gain entirely if you've owned the asset for at least 15 years and are 55 or over and retiring. The rules are detailed, so talk to your accountant well before you sell.
GST:
Most small business sales are structured as a sale of a going concern. If the conditions are met, no GST is payable on the sale. The sale must be for payment, the buyer must be registered or required to be registered for GST, and both parties must agree in writing that it's a going concern. You also have to hand over everything needed for the business to keep operating, and keep trading right up to the day of sale. If any of those conditions aren't met, GST can end up applying to the price you agreed on.
Staff entitlements:
If you have employees, the Fair Work Act's transfer of business rules apply. A buyer who isn't associated with you can choose not to recognise your employees' annual leave, redundancy pay or long service leave, which leaves you responsible for paying out those entitlements. Where leave does transfer to the buyer, it's common to adjust the purchase price to reflect its value. Either way, it affects what you keep, so work it out early.
Broker fees:
On a $300,000 sale, a 10% commission costs $30,000. At Bonza's 4%, it's $12,000. That $18,000 difference is money you built and should keep. That lower fee is possible because a dedicated team handles the marketing, onboarding and buyer enquiries, leaving the broker free to focus on getting your business sold.
Lease bond:
If you lease your premises, your bond is typically returned to you, and your buyer pays their own bond when they take over the lease.
Cash in the bank:
In most cases, the buyer brings their own working capital (cash to keep running the business). Depending on whether there is any work in progress or outstanding debts to be paid, the cash in the bank is typically yours to keep.
Getting a Real Number
Online calculators are a good place to start. Our calculator gives you a quick estimate in a few minutes.
But the most accurate valuation comes from someone who sees what buyers are paying right now. Bonza fields more than 1,000 buyer enquiries every week across Brisbane, Sydney, Melbourne and Perth, so our appraisals are grounded in live demand, not guesswork. The number in your head might be right. It might be low. Either way, it's worth finding out before you make any decisions.
Request a free appraisal and we'll tell you where your business sits.
