Business valuation calculator: what it can and can't tell you.
A business valuation calculator multiplies your profit by an industry multiple to give a rough price range. It's a quick starting point, but the answer is only as good as the profit figure you type in. Most calculators can't see your add-backs, your lease or what similar businesses are listed for in your state. For a figure you can explain to a buyer, base it on your actual profit and loss.
How business valuation calculators work
Most online calculators for small businesses follow the same basic formula:
Maintainable earnings × an industry multiple, plus stock at value.
- Maintainable earnings is the profit a new owner could expect: net profit plus one working owner's wage and any genuine add-backs. Some calculators ask for this directly. Others ask for revenue and a profit margin and work it out for you.
- The multiple comes from the type and size of business. Smaller owner-run businesses usually sell for a lower multiple than larger, managed ones.
- Stock is usually added on top, at its value on the day of settlement.
Some calculators value a business on its turnover instead. That's rarely reliable for a small business, because two businesses with the same sales can make very different profits.
Why calculator results vary so much
Put the same business into three calculators and you can get three quite different answers. The usual reasons:
- The profit figure. Is it before or after the owner's wage? Before or after tax? With or without depreciation, interest and one-off costs? A small difference in what you enter becomes a big difference in the result once it's multiplied.
- The add-backs. A calculator can't tell which of your expenses a buyer won't have, such as personal costs run through the business or a one-off repair. Those can be worth tens of thousands in the price. How add-backs work.
- The multiple used. A broad industry average can't allow for your lease, your location, how much the business depends on you, or whether its sales are growing or shrinking.
- Asking prices aren't sale prices. Calculators that lean on listings may reflect what sellers hope for, not what buyers pay.
Work it out yourself: a worked example
All figures are illustrative, made up for this example, and are not industry data.
A suburban owner-run business reports a net profit before tax of $80,000. The owner works full time and pays themselves $70,000.
| Item | Amount |
|---|---|
| Net profit before tax | $80,000 |
| + Owner's wage and super (one working owner) | $70,000 |
| + Depreciation | $10,000 |
| + One-off legal cost from a past dispute | $5,000 |
| Maintainable earnings | $165,000 |
If buyers were paying, say, 1.5 to 2.2 times maintainable earnings for a business like this (illustrative), it would be worth about $248,000 to $363,000, plus stock at value. Typing the $80,000 net profit into a calculator instead of the $165,000 would have halved the answer.
Calculator, appraisal or formal valuation?
| Online calculator | Appraisal from your P&L | Formal valuation | |
|---|---|---|---|
| Based on | A few figures you type in | Your actual accounts, lease and roster, with the add-backs worked out | A qualified valuer's full review |
| Shows the working | Rarely | Yes, line by line | Yes, in a formal report |
| Comparable businesses | Sometimes, broad | Businesses for sale in your state | As the valuer decides |
| Best for | A rough idea in minutes | Setting an asking price and showing buyers | Finance, family law, tax and disputes |
If you need a figure for a bank, a court, the ATO or a dispute, you need a formal valuation from a qualified valuer. Appraisal vs formal valuation.
Getting an estimate you can stand behind
- Use two or three years of profit and loss, not one, so a good or bad year doesn't skew the figure.
- Work out maintainable earnings properly: add back one owner's wage, depreciation, interest and genuine one-off or personal costs, and take off anything a buyer will have to pay that you don't.
- Check the lease. Buyers pay less for a business with a short lease or rent that's high for its sales.
- Compare with similar businesses for sale in your state, remembering that asking prices are usually above what businesses sell for.
More detail, with the industry guides: What is my business worth?
Want more than a calculator?
Upload your P&L, and add your lease and roster if you have them. AUS Brokers works out your maintainable earnings with the add-backs explained, applies the multiple range for your type and size of business, and checks comparable businesses currently for sale in your state. You can add a buyer-ready profile to send to buyers yourself.
An indicative appraisal only. AUS Brokers doesn't provide valuations, and doesn't act for buyers or sellers. Selling in Victoria? Vic Brokers can sell it for you.
Frequently asked questions
Are business valuation calculators accurate?
They're a rough guide. The result depends heavily on the profit figure you enter and the multiple the calculator uses, and most can't allow for add-backs, the lease or your location. Use one for a ballpark, not a price.
What multiple should I use for my business?
It depends on the type of business, its size and its risk. Smaller owner-run businesses usually sell for a lower multiple of maintainable earnings than larger managed ones, and a short lease or heavy reliance on the owner pulls it down. Our industry guides explain what moves the multiple up or down.
Can I value a business on its turnover?
Not reliably for a small business. Two businesses with the same sales can make very different profits, and buyers pay for profit. Turnover is mainly useful as a check, for example rent as a share of sales.
Is an online appraisal the same as a valuation?
No. An appraisal is an indicative estimate to help you price and sell. A formal valuation is prepared by a qualified valuer for finance, family law, tax or disputes. AUS Brokers provides appraisals only, not valuations.
What do I need for a more accurate estimate?
Two or three years of profit and loss statements, your lease, your staff roster or wages, and notes on anything the accounts don't show, such as personal costs run through the business or the hours you work.
General information only, not financial, tax or legal advice. Figures in the worked example are illustrative.