Guide
Adjusting profit when the business rents from the owner
How profit is normalised when a business pays an owner's related entity more or less than market rent, with a worked example and the evidence a valuer needs.
Topic
Business valuation fundamentals
How value is actually worked out: earnings, normalisation, methods, cash and debt, goodwill and the interest being valued.
Written for: Business owners, accountants and advisers who want to understand or check a valuation.
Valuo Insights
29 resources
Reference
Business valuation glossary
Plain explanations of the terms used in Australian business valuations, each linked to a worked example or deeper guide.
Guide
Choosing the valuation date and valuing a business at a past date
Why the valuation date matters, who or what sets it, and how a business is valued at a past date using only what was known or reasonably foreseeable then.
Guide
How cash, debt and debt-like items change what the shares are worth
How surplus cash, borrowings and debt-like items such as unpaid tax, leave and shareholder loans move a business value to a share value, with a worked bridge.
Guide
How dependence on the owner affects business value outside healthcare
How reliance on the owner's relationships and skills affects what a trades, consulting or service business is worth, with a dependence scorecard and transition steps.
Guide
How relying on a few large customers affects business value
How dependence on a few large customers affects maintainable earnings and value, how valuers reflect the risk, and what owners can do before a sale.
Guide
How to normalise a working owner's salary in a business valuation
Why a valuation replaces what a working owner draws with the market cost of the roles they perform, including super, family payroll and evidence.
Guide
How to value a business with negative or volatile earnings
Why a simple earnings multiple fails when profits are negative or erratic, and how the cause of the losses points to normalised earnings, DCF or net assets.
Guide
How valuers choose a capitalisation multiple
For accountants: the evidence and reasoning behind the capitalisation multiple in a business valuation, how it links to a required return, and the risk factors that move it.
Reference
Market value, fair value and special value: which standard applies?
A reference for lawyers and advisers: how market value, fair value and special value differ in Australian tax, accounting, takeover and shareholder agreement settings.
Guide
Preparing a client's financials for a valuation: an accountant's guide
For accountants: how to prepare a client's figures for a business valuation, with a worked example from the tax return through add-backs to normalised EBITDA.
Guide
The business, the shares or the units: what is being valued?
Why a valuation must say whether it values the business assets, a company's shares or a trust's units, and what comes across to the buyer in each case.
Reference
Valuation methods reference guide
One hypothetical business valued four ways: capitalised earnings, discounted cash flow, net assets and market evidence, with the assumptions and limits of each.
Guide
What counts as a non-recurring expense in a business valuation
A practical test for which costs can be added back as genuinely one-off when a business is valued, and which so-called one-offs keep coming back.
Guide
What goodwill is and how a valuation works it out
Goodwill is what is left after the identifiable net assets are taken from the value of the whole business: how it is worked out, when it is nil, and an example.
Guide
When is a DCF valuation credible for a private business?
When a discounted cash flow valuation suits a private business and when it is unreliable, with a decision table and a worked sensitivity on growth and discount rates.
Guide
When the assets, not the earnings, set a business's value
When net assets, not earnings, set a business's value: the realisation floor, plant valuations, economic obsolescence and freehold property, with an example.
Guide
Which year's profit should a business valuation use?
Last year, an average, a weighted average or a forecast: how the pattern of a business's results decides which earnings figure a valuation should rely on.
Guide
Why turnover alone does not tell you what a business is worth
Two hypothetical businesses with the same revenue and very different values, and when a revenue-based approach is used in a valuation and where it falls short.
Guide
Are free business valuation calculators accurate?
A free calculator gives a rough idea from the numbers you enter, but cannot check them or judge risk. Here is when an estimate is enough.
Guide
Are online business valuations reliable?
An online business valuation can be reliable for the right purpose if a valuer reviews your real financials. Here is what to check before you rely on one.
Guide
How do you value a small business in Australia?
Most small businesses are valued on maintainable earnings, checked against other methods. Here are the main methods, when each fits and common mistakes.
Guide
How long does a business valuation take?
How long a business valuation takes depends mostly on how fast complete financials arrive, then on questions, complexity and review. Here is why.
Guide
How much does a business valuation cost in Australia?
Business valuation fees in Australia depend on purpose, size, complexity and who relies on the report. See what drives cost and Valuo's fixed fees.
Guide
How much is my business worth?
Your business is worth what its maintainable earnings support, after allowing for risk and backed by evidence. Here is how a valuer works it out.
Guide
What documents do I need for a business valuation?
A practical checklist of the documents needed for a business valuation in Australia, from financial statements to leases and debts, and why each matters.
Guide
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.
Guide
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.
Guide
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.
From the specialist practices
Oliver Group is the Valuo practice for restructures, tax and CGT, and shareholder buyouts. These articles open on the practice's own site.
Tools
Work it through
Tool
Capitalised earnings sensitivity table
See how a range of capitalisation multiples, which you supply, changes an earnings-based value, and the capitalisation rate each multiple implies.
Tool
Earnings normalisation worksheet
Adjust reported profit for owner remuneration, personal expenses, related-party rent and genuinely non-recurring items, over up to three years. Download it as an Excel workbook.
Tool
Enterprise value to equity value calculator
Bridge from enterprise value to equity value with surplus cash, debt, debt-like items and a working capital adjustment, with every formula shown.