How to Value a Business in Australia: Straightforward Advice for Owners

What's your business really worth? It depends on what you're valuing and why. Whether you're looking to sell, raise capital, or settle a dispute, understanding how business valuations work is critical.

If you're planning to sell, you’ll also want to read our guide on how to sell your business without making costly mistakes.

This guide breaks down the valuation methods that matter, and the real-world context behind them.

Why You Might Need a Business Valuation

There are a handful of scenarios where getting a valuation isn't just helpful, it's essential:

• Buying or selling a business

• Succession planning

• Tax requirements (e.g. CGT, restructuring)

• Shareholder exits or disputes

• Family law settlements

• Employee share schemes

In each case, the reason for the valuation will influence how it's done and what is needs to show.

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Common Business Valuation Methods Explained

There are several valuation methods, but three are most common for small to mid-sized private businesses:

1. Profit x Multiple (Capitalisation of Earnings)

   This is the method most owners are familiar with: take your profit, multiply by a number, and there's your valuation.

   
   

   But here's what matters:

   • "Profit" means EBIT (Earnings Before Interest & Tax), usually normalised to reflect the true commercial performance.

   • The "multiple" is based on risk, growth potential, and comparable sales. It's not a guess - it reflects what buyers are paying in your industry.

   
   

   Normalisation removes:

   • One-off costs (e.g. legal fees)

   • Non-commercial items (e.g. overpaid owners)

   • Accounting quirk (e..g depreciation policies)

   
   

   Note: Software businesses sometimes use a revenue multiple instead of profit.

   
   

2. Discount Cash Flow (DCF)

   This method is all about future cash. It's common for:.

   • Startups or pre-revenue businesses.

   • High-growth businesses reinvesting profits.

   
   

   You forecast future cash flows, add a terminal value, then discount it all back to present day. Why? Because $1 today is worth more than $1 in 10 years.

   
   

   It's highly technical, and only as strong as your assumptions. A great tool in the right hands but risky if your forecasts are optimistic or vague.

   
   

3. Net Asset Value (NAV)

   NAV is balance sheet-base. It works best for:

   • Asset-heavy businesses (e.g. equipment hire, manufacturing)

   • Businesses with low profitability but strong underlying value

   
   

   There are variations:

   • Net Tangible Assets: excludes goodwill and intangibles

   • Adjusted NAV: revalues assets/liabilities to fair market value

   • Liquidation Value: what the business is worth if shut down tomorrow

   
   

   Be cautious - NAV can oversimplify the picture if the business has strong cash flow or goodwill that's not reflected on the books.

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What Are You Actually Valuing?

Before you start, get clear on what's being valued:

• A specific asset (e.g. IP, equipment, real estate)?

• The business itself (enterprise value)?

• The equity in a company (shares, including cash/debt)?

Asset Valuation

If you're selling or licensing IP, for example, you don't need a full business valuation. You just need to value that asset. Often driven by tax, legal or licensing requirements.

Enterprise Value

This is the value of the business operations - what a buyer would pay to take over the team, systems, IP, customers, and cash flow (but not necessarily the company shell).

Equity Value

Equity value is enterprise value plus cash, minus debt.

If you're selling company shares, you're transferring everything - the good, the bad and the balance sheet.

For a breakdown of what to watch out for during a sale, check out our step-by-step guide to selling your business.

If you're not clear on the difference, deal can quickly get messy.

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Need Help Valuing A Business?

At Turville Advisory, we help business owners get clear on the numbers - before they make big decisions.

Whether you're preparing to sell, raise funds, or bring in a new shareholder, we can support with tailored valuations, commercial insights and outsourced CFO support.

Need clarity on what your business is really worth? Let's talk.