Australia guides

How much is my business worth?

Most Australian small and medium businesses are valued as a multiple of their earnings, not their turnover. That multiple typically sits between 1.5 and 6 times earnings depending on industry, size and risk, with some sectors going higher. This guide explains how the multiple works, what moves it, and how to check your own numbers before relying on them.

By the bizflip team · Published 29 August 2026 · Facts checked 29 August 2026 · Sources listed below

Most Australian small and medium businesses are valued as a multiple of what they earn, not what they turn over. The multiple typically sits somewhere between 1.5 and 6 times earnings depending on the industry, the business's size and how risky or owner-dependent it is — some sectors go higher again. This guide explains how that multiple works, what moves it up or down, and how to sanity-check your own numbers before you rely on them.

There's no single formula — it depends what the valuation is for

A valuation done for a bank, a family law settlement, an insurance claim or a partner buyout can use a different method to one done for an open-market sale. business.gov.au sets out several standard approaches: comparing your business to similar businesses that have sold recently (market comparison), valuing net assets — tangible plus intangible (asset valuation), working out a return-on-investment figure from net profit, estimating what it would cost to build a similar business from scratch (replacement cost), and capitalising expected future profit.

For a business going up for sale on the open market, buyers and their advisers overwhelmingly default to one of these: a multiple of earnings.

For a sale, earnings set the price, not turnover

Two figures come up constantly in trading-business valuations:

• EBITDA — earnings before interest, tax, depreciation and amortisation. It strips out financing choices and non-cash accounting decisions so businesses can be compared like for like. It's the usual metric for larger or professionally managed businesses.
• SDE — seller's discretionary earnings. This is EBITDA plus the wage of one owner-operator, added back. It's used for smaller, owner-run businesses because it shows what a buyer who works in the business would actually take home once they replace the seller.

Neither figure comes straight off a tax return. Getting from reported profit to a "normalised" earnings figure usually means adding back or removing one-off and personal items — an owner's above-market (or below-market) salary, a one-off legal bill, a family member on the payroll who won't come with the sale, private use of a business vehicle. This normalisation step is where valuation disagreements usually start, and it's worth doing with an accountant or business broker rather than alone.

Once earnings are normalised, the arithmetic is simple: business value = normalised earnings × multiple.

What the multiple actually looks like

Multiples vary a lot by sector, because they're really a measure of risk — how likely the buyer thinks it is that today's profit keeps showing up after settlement. Reported ranges from Australian business valuation advisers give a sense of the spread:

These are reported ranges, not a rule book — a specific business can sit outside its sector's typical band. Separately, market reporting on established Australian service businesses puts the typical range at roughly three to six times normalised EBITDA. The two views overlap, because "typical" always means a wide range: your actual multiple depends on your business's size, risk profile and how replaceable you are as the owner, not just which industry it's filed under.

What moves a multiple up or down

• Recurring vs project revenue — subscriptions, service contracts and repeat customers are worth more per dollar of earnings than one-off jobs that have to be re-won every time.
• Owner dependence — a business that keeps running, and keeps its customers, without the current owner working in it day to day is worth more than one where the owner effectively is the business.
• Customer concentration — a common rule of thumb among advisers treats any single customer above roughly 10–20% of revenue as a soft flag that pulls the multiple down, because losing that one relationship threatens the whole earnings figure. The threshold varies with deal size; what matters is how survivable the loss of your biggest customer would be.
• Records and systems — clean, reconciled financials and documented processes lower a buyer's due-diligence risk. Cash-heavy or informal bookkeeping does the opposite, and can also mean the true earnings figure is understated.
• Growth and industry conditions — a business in a growing category with active buyer demand generally attracts a higher multiple than one in a flat or shrinking sector.

Why revenue alone is a misleading number

Two businesses with identical turnover can be worth very different amounts. One runs on a 30% margin with a diversified customer base and a manager who runs the floor; the other runs on 8% margin, one big customer, and the owner working seven days a week. Same revenue line, very different amount of earnings — and very different risk that those earnings continue after a sale.

A multiple of revenue is sometimes used instead of a multiple of earnings, but usually only where profit is unreliable or not yet established — an early-stage or loss-making online business, for example — and even then it's treated as a rougher, higher-risk shortcut than an earnings multiple. If turnover is the only number you can quote when someone asks what your business is worth, you're answering a different question to the one a buyer is actually asking.

Sanity-checking your own numbers

Before you multiply an earnings figure by anything, it's worth checking whether that figure is realistic for your industry. The ATO publishes small business benchmarks every year — average cost-of-sales and expense ratios drawn from tax data across more than 100 industries — as a free tool for business owners to compare their own performance against others in the same trade and turnover band.

The benchmarks don't produce a valuation or a multiple; they're a check on your inputs, not your output. But if your reported cost of sales or expenses sit well outside the normal range for your industry, that's worth understanding — and correcting if it's a bookkeeping issue — before you or anyone else relies on the profit figure that comes out the other end. Listing a business for sale on bizflip doesn't cost anything, so getting your numbers right first is worth doing before you list, not after.

Getting an actual number

Everything above will tell you roughly where a business like yours tends to land. It won't tell you what your business is worth, because that depends on specifics — your actual margins, your actual customer base, your actual reliance on the owner — that a rule of thumb can't see. For a number you'd rely on in a negotiation, a bank application or a legal process, get an accountant, a business broker or a qualified valuer to normalise your earnings and apply a multiple to your specific circumstances, not just your industry's average.

Sources

Every load-bearing claim in this guide, and where it comes from:

• Standard business valuation methods include market comparison, net asset valuation, return on investment, replacement cost, and capitalising future profit. — business.gov.au (Australian Government)
• Guidance for owners on working out what a business is worth before selling. — business.gov.au (Australian Government)
• The ATO publishes small business benchmarks annually, covering more than 100 industries drawn from tax data, as a free tool for owners to compare their performance. — Australian Taxation Office
• The ATO's most recent small business benchmark release covers 100 industries using data from over 2 million small businesses. — Australian Taxation Office
• Seller's Discretionary Earnings (SDE) equals EBITDA plus the add-back of one owner-operator's compensation, used for smaller owner-run businesses, versus EBITDA which is used for larger, professionally managed businesses. — Wall Street Prep
• Established Australian service businesses are currently reported to trade at roughly three to six times normalised EBITDA. — PieLAB
• Reported Australian sector multiple ranges (EBIT): professional services 2.0x-4.0x, trade services 1.5x-3.0x, healthcare/medical 3.0x-6.0x, retail 1.0x-2.5x, technology/SaaS 4.0x-10.0x+, hospitality 1.0x-2.0x, manufacturing 2.0x-4.0x. — Verus Advisory & Assurance
• Value drivers that shift a multiple up or down include recurring revenue, owner independence, customer diversification, documented systems, and growth trajectory (the 10–20% single-customer flag is a general adviser rule of thumb, not Nash Advisory's figure). — Nash Advisory

Ready for your own number? The valuation calculator is free and ungated, and its methodology is public.