Most Australian business owners know roughly what their business turns over. Very few know what a buyer would actually pay for it — or why.
This guide explains how buyers think about valuation. Understanding their framework before you enter any sale process is the single most useful thing you can do as a seller.
The foundation: Adjusted EBITDA
Buyers don't pay a multiple of your revenue. They pay a multiple of your adjusted EBITDA — earnings before interest, tax, depreciation, and amortisation, after normalising for items that won't continue under new ownership.
Your accountant's profit figure is not the same thing. It reflects how your business runs with you in it. A buyer needs to know what the business earns with a market-rate owner operator in place.
+ Owner salary above market rate
+ Personal expenses run through the business
+ One-off costs that won't recur
+ Non-cash charges (depreciation, amortisation)
− Cost of a replacement manager (if you're leaving)
− One-off revenue that won't recur
= Adjusted EBITDA (the number buyers use)
Example: A business reports $400k profit. The owner pays themselves $280k (market rate for their role is $120k). After the add-back, adjusted EBITDA is $560k. A buyer paying 4× gets to $2.24M — not the $1.6M the reported profit suggested.
The multiple
The EBITDA multiple reflects how confident a buyer is in the earnings continuing and growing under new ownership. It's not fixed — it's negotiated, and it varies significantly by industry, business quality, and market conditions.
| Business type | Typical range (AU, 2026) | What drives the upper end |
|---|---|---|
| Trade / owner-operated | 1.5–3× | Contracts, repeat customers, trained staff |
| Professional services | 2–4× | Client relationships transferable to team |
| Manufacturing / industrial | 3–5× | IP, proprietary processes, long contracts |
| Established SMB (documented) | 3–5× | Systems, second-tier management, recurring revenue |
| Tech-enabled / SaaS-like | 5–8× | Subscription revenue, low churn, scalable ops |
These ranges assume the business is genuinely prepared for sale. Businesses that lack documentation, have key-person dependency, or carry undisclosed risks typically trade at the lower end — or don't sell at all.
The five risk adjustments buyers make
Every buyer has a checklist of risk factors. Each one can compress the multiple or reduce the offered price. Understanding these before you go to market lets you fix what's fixable.
1. Owner dependency High impact
If the business can't run without you for 3 months, buyers see a transition risk. They'll either discount heavily, require a long earnout, or walk. Fix: build a management layer and document how things work before you list.
2. Customer concentration High impact
Any single customer over 20–25% of revenue is flagged. Over 40% can kill a deal. Fix: diversify your customer base, or at minimum get long-term contracts in place to demonstrate stickiness.
3. Financial quality Medium impact
Three years of clean, consistently prepared financials are the baseline expectation. Personal expenses mixed with business costs, inconsistent treatment of add-backs, or financial statements that don't reconcile all erode buyer confidence. Fix: work with your accountant to normalise 3 years of P&Ls before you go to market.
4. Revenue predictability Medium impact
Project-based or lumpy revenue trades at a lower multiple than recurring or contractual revenue. A business where 60% of next year's revenue is already contracted is worth meaningfully more than one where every dollar is re-won each year.
5. Key staff retention Manageable
Buyers want to know who stays. If your top salesperson, ops manager, or technical lead is likely to leave when you do, that's a risk. Fix: retention agreements (even informal) timed to settlement give buyers comfort and protect your price.
What buyers look for beyond the numbers
Financial performance gets you in the room. These factors determine whether you close — and at what price.
- Transferability: Can the business be handed over cleanly? Is there a data room ready? Are contracts, IP, and leases all in the name of the entity being sold?
- A story that holds: Can you explain 3 years of financial history in a way that's consistent and credible? Buyers stress-test the narrative in due diligence.
- Management depth: Is there someone who can run day-to-day operations during the transition? The answer affects both price and structure.
- No surprises: Sellers who disclose issues proactively close faster and at higher prices than sellers whose issues surface in due diligence.
The after-tax number
Sale price is a gross figure. What matters is what you keep.
Australian business sellers may be eligible for the small business CGT concessions — including the 15-year exemption (complete CGT-free exit for qualifying owners), the active asset reduction, and the retirement exemption (up to $500k tax-free). These can reduce your tax bill dramatically, or to zero.
In 2026, the general 50% CGT discount is also under active review ahead of the May 12 federal budget. Understanding your after-tax position under current rules — before Budget Night — is worth doing now.
→ How Much Tax Will I Pay When I Sell? (full guide)
→ Australia's CGT Discount Under Review — What Business Sellers Need to Know
Putting it together: a worked example
Reported profit: $320k
Add-backs: +$160k (owner salary above market, personal expenses)
Adjusted EBITDA: $480k
Multiple applied: 3.5× (documented systems, 2 key staff staying, some customer concentration)
Enterprise value: $1.68M
Less: working capital adjustment −$45k
Net proceeds: ~$1.635M
Tax (with small business CGT concessions): potentially $0–$80k depending on structure
The difference between a well-prepared and poorly-prepared seller at this size is often $200–400k — not from negotiating harder, but from starting earlier.
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Related reading
- How Much Tax Will I Pay When I Sell My Business?
- Tax Structuring: Small Business CGT Concessions Explained
- How Buyers Recast EBITDA — and Why It Changes Your Price
- What Is My Business Worth? (Australian Guide)
- Australia's 50% CGT Discount Is Under Review
- Seller Readiness Checklist →
General information only — not financial, legal, or tax advice. Business valuations depend on specific circumstances. Speak to a qualified accountant or adviser before making decisions about your business sale.