How to Value a Small Business Before You Buy or Sell, With a Free Calculator

Whether you are buying your first business or getting ready to sell one you have built over years, the same question sits at the centre of every negotiation: what is it actually worth? There is no single right answer, but most small business sales in Australia start from the same method, and you can work through it yourself before you speak to a broker, an accountant or the other side.

This guide walks through that method step by step, shows how to sense-check the result, and explains when a professional valuation is worth paying for.

Start with the profit a new owner would actually earn

Most small businesses are priced as a multiple of profit, so the first job is getting the profit figure right. The net profit in the tax return is rarely the number buyers and sellers use, because owners often run personal or one-off costs through the business and may or may not pay themselves a wage.

The figure that matters is adjusted profit, often called owner's benefit. To get there, start with net profit before tax and then:

• add back the owner's wage or drawings, because the new owner will decide how to pay themselves;
• add back genuinely personal costs run through the business, such as a family car or a private phone;
• add back one-off costs that will not recur, such as a major repair or a legal dispute that has been settled;
• take out any income that will not transfer with the business, such as a contract that ends at settlement.

Be strict. Every add-back should be backed by records, and a buyer's accountant will test each one. Cash takings that never made it into the books cannot be counted: they cannot be proven, and no lender or careful buyer will pay for them.

For larger businesses with a manager already in place, buyers usually look at EBITDA (earnings before interest, tax, depreciation and amortisation) instead, with a market wage for the manager left in as a cost.

Apply a multiple that suits the business

Once you have adjusted profit, multiply it by a figure that reflects how risky and how transferable that profit is. As a broad guide, owner-operated micro businesses often change hands at around 1 to 2.5 times owner's benefit, while established businesses under management with a long lease might be priced at 2.5 to 4 times EBITDA. Larger or specialised businesses can go higher. These are ranges buyers and sellers argue over, not rules.

It helps to see what comparable businesses are asking. The table below shows median asking price to profit multiples for some common small business categories, calculated from live listings on BizExchange at the time of writing in October 2026. They are asking prices, not sale prices, so treat them as the opening position in a negotiation rather than the result.

Across all industries except property and accommodation, where freehold and management rights lift prices, the median was 1.9 times profit from 802 listings.

Adjust for what pushes the multiple up or down

Two businesses with identical profit can be worth very different amounts. The factors that move the multiple most are:

• The lease. How long is left, including options, and whether the landlord will assign it. A short lease with no options can cut the price sharply, because the buyer may be paying for profit they can only earn for a year or two.
• Dependence on the owner. If customers come for the owner, or the owner does all the skilled work, the buyer takes on more risk. Businesses run by staff usually attract a higher multiple.
• Concentration. One customer or one supplier accounting for a large share of revenue is a risk buyers will price in.
• The trend. Three years of steady or rising profit is worth more than one good year after two weak ones.
• Clean records. Lodged tax returns and business activity statements that match the profit and loss make a higher price much easier to defend.
• Licences, contracts and staff. Anything that needs a fresh approval, or might not transfer to a new owner, is a risk to price in.

Add stock, and treat property separately

Stock is usually added to the agreed price at cost, counted at or just before settlement, rather than built into the multiple. Check the listing and the contract: "plus stock" or "plus SAV" (stock at value) means you pay for stock on top of the price. Plant and equipment needed to run the business is normally included in the price, so make sure it is itemised in the contract and in working order.

If the sale includes freehold property, value the property separately at its own market value. Mixing property into a profit multiple makes a business look far more expensive, or far cheaper, than it really is.

Cross-check with other methods

The government's business.gov.au guide to valuing your business notes there is no single set method and lists several that can be combined, including current market values, return on investment, the value of the business's assets, the cost of starting the same business from scratch, and its expected future profit.

Return on investment is a useful sense check for buyers. Divide the adjusted profit by the price and multiply by 100. For example, a business earning $90,000 in adjusted profit at a price of $180,000 returns 50 per cent a year, although part of that return is really your own wage for working in the business. If the return looks too good, ask why. If it looks too thin, ask whether the price assumes growth you would be paying for in advance.

The cost of starting from scratch is a good check on goodwill. If you could set up the same business, with a similar fit-out and location, for much less than the asking price, the seller needs to show why the existing customers, staff and reputation are worth the difference.

Check your numbers with a free calculator

Once you have an adjusted profit, you can compare it with what similar businesses are asking using BizExchange's free business worth calculator. You choose the industry, enter the yearly profit you would show a buyer and any stock at cost, then answer a few questions about how long the business has traded, how much of the lease is left, your role in the business and whether profit has been falling, steady or growing.

The calculator works from the median asking price to profit multiples of live listings in that industry, once there are at least 20 to draw on, and your answers move the estimate within that range. Stock is added on top. The figures refresh daily, there is no sign-up, and the result is presented as a guide based on asking prices rather than a valuation, which is exactly how it should be used.

When to pay for a professional valuation

A do-it-yourself estimate is a good starting point for setting an asking price or deciding whether a listing deserves a closer look. It is not enough when money or legal obligations depend on the number. Engage an accountant who values businesses, or a qualified business valuer, when:

• a lender needs a valuation to finance the purchase;
• you are buying out a partner or settling a dispute between owners;
• the figure is needed for tax purposes, such as working out a capital gain;
• the business is large, complex or unusual enough that comparable listings are hard to find.

Whichever side of the deal you are on, the aim is the same: a price you can explain line by line. Get the profit right, choose a multiple you can justify, add stock and property separately, and check the result against what the market is asking. A seller who can show their working is in a stronger position at the negotiating table, and a buyer who has done the sums is far less likely to overpay.