The Valuation Group knowledge centre
Better questions.
Clearer decisions.
Understand the numbers, assumptions and choices behind a business valuation. Practical explanations for owners, shareholders and advisers, with worked examples and the questions to ask before you commission a report.
Start here
The essentials before your first conversation.
4 min read
How is a business valued?
Understand business valuation methods, adjusted earnings and the difference between business and share value. Includes a simple example and questions to ask.
4 min read
Your business valuation information checklist
Prepare for a business valuation with a practical checklist of financial records, ownership documents, commercial background and questions to clarify before engagement.
Earnings & methods
Understand the financial measures and approaches behind the conclusion.
3 min read
A loss does not answer the whole valuation question
Explore how loss-making businesses can be assessed, including assets, funding needs, credible forecasts and the limits of applying an earnings multiple.
3 min read
A valuation multiple needs a reason
Learn what business valuation multiples measure, why comparisons can mislead and what evidence is needed before applying a multiple to earnings.
3 min read
SDE and EBITDA: what is the difference?
Compare seller’s discretionary earnings with EBITDA, understand owner salary adjustments and avoid applying a multiple to the wrong earnings measure.
5 min read
The capitalisation of earnings method, explained
How the capitalisation of earnings method values a business: maintainable earnings, normalisation, the capitalisation rate and multiple, and a worked example.
3 min read
What should be adjusted in EBITDA?
Understand EBITDA add-backs, owner remuneration and one-off expenses. A practical guide to the evidence behind adjusted business earnings.
5 min read
When does a discounted cash flow valuation make sense for a small business?
When a discounted cash flow valuation suits a small business, how the forecast, terminal value and discount rate work, and how a reviewer tests the model.
4 min read
Why rules of thumb mislead, and what to use instead
Why rules of thumb such as a multiple of revenue or fees mislead when valuing a business, when they help as a sense check, and what evidence to use instead.
Value & ownership
Identify what is being valued and what belongs in the calculation.
3 min read
A shareholder loan is separate from the shares
Understand how loans to or from shareholders can affect a business valuation and why share value, loan balances and settlement proceeds need separate schedules.
3 min read
Business value and share value are different questions
Understand enterprise value, equity value and the bridge between them, with a hypothetical example covering surplus cash, debt and working capital.
4 min read
How are shares in a private company valued?
Learn how shares in a private company are valued: the bridge from business value to equity, share classes, control, marketability and a worked example.
3 min read
The percentage is only the starting point
Understand the questions involved in valuing a minority shareholding, including share rights, agreements, control, distributions and transfer restrictions.
3 min read
What is the goodwill in a business?
Understand business goodwill, owner dependence and transferability, and why goodwill should not simply be added to an earnings-based valuation.
3 min read
What working capital comes with the business?
Learn how stock, receivables and operating liabilities affect business value and sale terms, with a simple working-capital adjustment example.
Commissioning a valuation
Choose the right scope, date, valuer and deliverable.
4 min read
How to read a business valuation report
The sections a good business valuation report contains, what to check in each, the red flags that signal weak work, and the questions to put to the valuer.
3 min read
Value is assessed at a date. Which one?
Understand the difference between a valuation date and a report date, how historical valuations use evidence and what to prepare for an earlier date.
3 min read
Which kind of valuation do you actually need?
Compare an indicative business estimate with a signed valuation report, understand limitations and check what your intended recipient needs before commissioning work.
5 min read
Who can value a business in Australia, and what to ask before you engage them
Brokers, accountants, online calculators and independent valuers all offer business values. What separates them, and what to ask before you engage anyone.
Selling & transactions
Connect the valuation to the commercial decision.
4 min read
How to increase the value of your business before a sale
The value drivers a buyer prices, why improving the multiple differs from improving earnings, why 12 to 24 months of evidence matters, and what not to do.
3 min read
Value, asking price and sale price are not interchangeable
Compare a business valuation, a seller’s asking price and an agreed sale price. Understand how earnouts, timing, assets and buyer circumstances change the comparison.
Tax, restructures & agreements
Valuations that support a transaction, a rollover or an agreement between owners.
5 min read
Valuations under a buy-sell or shareholder agreement
What buy-sell and shareholder agreement clauses prescribe for a valuation, why formulas drift from reality, and how to instruct an independent valuer well.
5 min read
What does market value mean in a business valuation?
Market value in a business valuation means the price a willing but not anxious buyer and seller would agree at arm's length. Learn what it requires.
5 min read
Why a restructure or related-party transfer needs a market value report
Why moving a business, assets, IP or shares between related entities needs a market value report at the transaction date, and what a reviewer expects to see.
How to use these guides
General guidance, honestly labelled.
Published by Valuation Group, based in Double Bay, Sydney. These guides explain common concepts and preparation questions. Examples are hypothetical. They do not assess an individual business or replace the legal, tax or specialist advice a particular matter may require.
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