How do I value my small business for sale in Australia?

Start with an EBITDA multiple using your last 3 years of normalised earnings. Find comparable industry multiples through business brokers or industry reports. Then adjust for factors specific to your business — customer concentration, lease term, key-person dependence, systems and processes. A business valuer (certified by the Business Valuers Association of Australia) provides a defensible valuation for legal or tax purposes.

Do I need a formal valuation for the ATO?

A formal valuation is required when transferring business assets to related parties (to ensure the transaction is at arm's length), for Division 7A loan calculations involving business assets as security, for employee share schemes, and for CGT purposes when market value substitution rules apply. The ATO may reject informal or self-prepared valuations. Planning to sell your business or need a valuation for tax purposes? Contact AWTS for specialist business sale advice and ATO-compliant valuation support.

Business Valuation Formula: 2026 Guide for Australian Business Owners

Business valuation is a critical process for Australian business owners considering a sale, bringing on investors, planning succession, or resolving disputes. In 2026, the method used to value a business significantly affects the price achieved — and the CGT payable on the sale. Understanding the main business valuation formulas used in Australia helps you negotiate better outcomes and plan your tax position effectively.

Why Business Valuation Matters for Tax

Business value directly determines your CGT liability on sale. For the small business CGT concessions (which can exempt up to 100% of the gain), the net assets test of $6 million applies at the time of the CGT event — making valuation critical to eligibility. A professionally prepared valuation also protects against ATO challenges, particularly for Division 7A loans using the business as security, and for employee share scheme valuations.

The Main Business Valuation Methods in 2026

1. EBITDA Multiple (Most Common for SMEs)

EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortisation) multiple is the most commonly used method for Australian SMEs. The business is valued at a multiple of its normalised EBITDA:

Value = Normalised EBITDA x Industry Multiple

Typical multiples in 2026 by sector: Professional services: 3-5x; Trade businesses: 2-4x; Manufacturing: 3-5x; Technology/SaaS: 5-10x+; Retail: 1-3x. The multiple reflects growth prospects, customer concentration, IP strength, and management depth.

2. Discounted Cash Flow (DCF)

DCF values the business based on the present value of projected future free cash flows, discounted at the weighted average cost of capital (WACC). This method is most appropriate for businesses with predictable, growing cash flows and is commonly used for larger transactions. It requires detailed financial modelling and is sensitive to assumptions about growth rates and discount rates.

3. Net Asset Value (NAV)

The NAV method values the business at the net value of its assets (what you could get by selling everything and paying all debts). This is most appropriate for: asset-intensive businesses (property, equipment); holding companies; or businesses with poor earnings but valuable underlying assets. For service businesses with minimal physical assets, NAV typically understates the true business value.

4. Revenue Multiple

Some industries value businesses as a multiple of annual revenue — typically used for early-stage businesses with minimal profits or for benchmarking in specific sectors (e.g., accounting practices: 1-1.5x recurring revenue; financial planning: 2-3x recurring revenue). Revenue multiples are a quick valuation shortcut but can overvalue low-margin businesses or undervalue high-margin ones.

Frequently Asked Questions

Start with an EBITDA multiple using your last 3 years of normalised earnings. Find comparable industry multiples through business brokers or industry reports. Then adjust for factors specific to your business — customer concentration, lease term, key-person dependence, systems and processes. A business valuer (certified by the Business Valuers Association of Australia) provides a defensible valuation for legal or tax purposes.
A formal valuation is required when transferring business assets to related parties (to ensure the transaction is at arm's length), for Division 7A loan calculations involving business assets as security, for employee share schemes, and for CGT purposes when market value substitution rules apply. The ATO may reject informal or self-prepared valuations.
Planning to sell your business or need a valuation for tax purposes? Contact AWTS for specialist business sale advice and ATO-compliant valuation support.