How to Value a Small Business for Sale in Australia

Every business owner thinks their business is worth more than it is.

Every buyer thinks it's worth less.

The truth is usually somewhere in the middle — but only if you know how to find it. I've valued dozens of businesses across 20+ years in private equity and corporate advisory. Some were worth exactly what the owner expected. Most weren't. Here's how to actually work out what a small business is worth in Australia.

The Only Number That Matters: EBITDA

If you're buying or selling a business under $10 million in revenue, everything starts with EBITDA — Earnings Before Interest, Taxes, Depreciation, and Amortisation.

Not revenue. Not profit. EBITDA.

Revenue tells you how big the business is. EBITDA tells you how much cash it actually generates. A $3 million revenue business with $150,000 in EBITDA is not worth much. A $1.5 million revenue business with $500,000 in EBITDA is a serious asset.

The formula is simple. The application is not.

EBITDA Multiples for Australian Small Businesses in 2026

Here's where most guides get vague. I won't.

For small businesses in Australia — the ones most people are actually buying and selling — typical EBITDA multiples in 2026 look like this:

Trades and services (plumbing, electrical, landscaping, cleaning): 2x – 4x EBITDA. A well-run trades business with recurring contracts and a solid team can push toward 4x. A one-man operation dependent on the owner is closer to 2x — sometimes less.

Professional services (accounting, consulting, engineering): 3x – 5x EBITDA. Depends heavily on client concentration and whether the clients stay when the owner leaves.

Manufacturing and distribution: 3x – 6x EBITDA. Higher multiples for businesses with proprietary products, long-term supply agreements, or hard-to-replicate equipment setups.

Food and hospitality: 2x – 3.5x EBITDA. Tight margins, high staff turnover, and lease dependency keep these lower.

These are guides, not gospel. Every business is different. But if someone quotes you a multiple outside these ranges, ask them to show their working.

PEBITDA vs. EBITDA: The Distinction That Catches People Out

Here's something that trips up first-time buyers and sellers constantly.

PEBITDA is "Proprietor's Earnings Before Interest, Taxes, Depreciation, and Amortisation." It includes the owner's salary and benefits in the earnings figure. EBITDA does not — it assumes a market-rate manager is being paid.

Why does this matter? Because a business that shows $400,000 in PEBITDA but needs a $150,000 manager to replace the owner only has $250,000 in EBITDA.

Most business brokers in Australia quote PEBITDA multiples. They'll say "3x earnings" and mean 3x PEBITDA. That's a lower effective multiple than 3x EBITDA. If you're comparing opportunities, make sure you're comparing like with like.

PEBITDA multiples typically run 0.5x to 0.7x lower than EBITDA multiples for the same business. A business quoted at "3.5x PEBITDA" is roughly equivalent to "2.8x–3x EBITDA."

Know which number you're using. Always.

The Adjustments That Make or Break a Valuation

Raw financial statements lie. Not deliberately — but they don't show what a buyer actually needs to know.

Here's what I adjust for in every valuation:

Owner benefits. The car, the phone, the fuel card, the spouse on payroll who works two days a month, the "business development" trips to Bali. These get added back to earnings.

One-off expenses. That $80,000 legal bill from the dispute with the former partner? Not recurring. Add it back.

Below-market rent. If the owner runs the business from a property they own and charges below-market rent, you need to adjust earnings down to reflect what you'd actually pay.

Deferred maintenance. If the owner hasn't replaced the fleet vehicles in 6 years, the business looks more profitable than it is. You'll be spending that money in year one.

Revenue concentration. If one client represents more than 20% of revenue, that's a risk factor. It doesn't change EBITDA, but it should change your multiple.

These adjustments can swing a valuation by $200,000 to $500,000 on a typical small business. Skip them at your peril.

What Drives a Higher Multiple

Not all businesses earning the same EBITDA are worth the same. Buyers pay more for:

Recurring revenue. A cleaning business with 50 commercial contracts renewing annually is worth more than a builder with one-off project revenue. Predictability reduces risk. Risk reduction increases price.

Owner independence. If the business runs without the owner for three months and nothing breaks, that's valuable. If the owner is the business, the multiple drops — hard.

Documented systems. SOPs, training manuals, CRM data, job management software. Anything that means a new owner isn't starting from scratch.

Growth trajectory. Flat is fine. Growing is better. Declining is a discount, no matter what the current EBITDA says.

Diverse customer base. No single client dominance. No single industry dependency. Spread reduces risk.

Strong team. Especially in trades. If your three best technicians walk when the owner leaves, the business is worth significantly less.

What Kills Value

Owner dependency. I've said it three times now. It's the single biggest value destroyer in small business.

Messy books. If the financials take months to reconstruct, buyers either walk or discount heavily. Neither outcome is good for the seller.

Lease risk. A short-term lease or an unfriendly landlord can make an otherwise solid business unbuyable.

Regulatory exposure. In Australia, this is getting more serious. The new Payday Super requirements coming in July 2026 mean businesses that haven't been paying super correctly are sitting on a compliance time bomb. Buyers check for this.

Concentration risk. One big customer. One key supplier. One critical employee. Any single point of failure compresses your multiple.

The Valuation Process: How I Actually Do It

Here's my workflow, simplified:

Step 1: Get three years of financials. Profit and loss, balance sheet, BAS statements, tax returns. If they can't produce these quickly, that tells you something.

Step 2: Normalise the earnings. Make the adjustments above. Calculate both PEBITDA and EBITDA.

Step 3: Research comparable sales. In Australia, this is harder than the US. We don't have the same public databases. Talk to business brokers. Check BizBuySell Australia and Lloyds Business Brokers listings. Look at industry reports from Nash Advisory or William Buck.

Step 4: Apply a multiple range. Not a single number. A range. For a well-run trades business doing $400K adjusted EBITDA, I might say 2.8x – 3.5x, giving a valuation range of $1.12M – $1.4M.

Step 5: Adjust for qualitative factors. Team strength, systems, customer concentration, growth, lease terms. This is where experience matters more than spreadsheets.

Step 6: Stress test. What happens if revenue drops 15%? What if you lose the biggest client? What if two key staff leave? If the business still works at a lower level, the valuation holds. If it collapses, your multiple was too high.

A Note on Using AI for Valuations

I use AI in my valuation work now. Not to replace judgement — but to accelerate the mechanical parts.

Financial normalisation. Comparable research. Sensitivity modelling. Draft information memorandums. These used to take days. Now they take hours.

But the judgement — whether this owner is telling the truth about customer relationships, whether the team will stay, whether the local market can sustain growth — that's still human work.

AI makes good analysts faster. It doesn't make bad analysts good.

The Bottom Line

Valuing a small business in Australia isn't complicated. But it is detailed. The difference between a good valuation and a bad one is usually in the adjustments — the things that don't show up on the P&L.

If you're buying: do the work. Pull the numbers apart. Don't trust the broker's information memorandum without verifying the inputs.

If you're selling: get your books clean 12 months before you go to market. Remove yourself from daily operations. Build recurring revenue. Every dollar of effort you put into these things comes back at a multiple.

That's the whole point of multiples. Small improvements multiply.