If you are thinking about selling your business, one of the first questions is simple:
The answer depends on your profit, assets, industry, location, buyer demand and how easy the business is to take over.
At Northern Business Brokers, we help business owners across Mackay, the Whitsundays, Bowen, Townsville, Cairns and wider North Queensland understand what their business may be worth before going to market.
A proper business value discussion gives you a clearer idea of price, buyer expectations and what may need to be improved before selling.
For a more formal overview, our business valuation page explains how businesses are commonly assessed before sale.
What Determines the Value of a Business?
The value of a business is usually based on its maintainable earnings, but profit is not the only factor.
Buyers also look at how reliable the income is, how involved the owner is, what assets are included, whether the lease is secure, whether staff can help run the business and whether the business can continue smoothly after settlement.
A business with clean financials, strong systems, good staff and steady profit will usually be more attractive than a business that depends heavily on the owner.
If your business is in the Whitsundays, read our business valuation Whitsundays guide for local pricing factors.
How Businesses Are Commonly Valued
A common way to value a business is:
Maintainable earnings x market multiple = estimated business value
For example, if a business makes $300,000 in maintainable earnings and the market supports a 2.5x multiple, the estimated value may be around $750,000.
This is only a guide. The final value may change depending on assets, stock, industry risk, local demand, growth potential and buyer confidence.
To calculate adjusted earnings, you also need to understand what are add backs.
What Profit Figure Is Used?
The profit figure used in a business valuation is usually not just the net profit shown in the accounts.
A broker will often look at adjusted maintainable earnings. This means reviewing the financials and allowing for things such as owner wages, one-off costs, personal expenses, unusual income, finance costs and other add-backs.
The goal is to understand what the business actually earns for a buyer on a normal operating basis.
Some buyers and advisers may also refer to PEBITDA when reviewing maintainable earnings.
Are Assets Included in the Business Value?
Assets may or may not be included, depending on the type of business and how the sale is structured.
In some businesses, vehicles, machinery, tools or equipment are needed to produce the profit, so they are part of the business value. In other cases, surplus assets, stock or property may be treated separately.
This is why business value cannot be worked out by simply adding profit and assets together. The right approach depends on the business, the industry and what buyers expect.
Once you understand likely value, our sell my business page explains how to prepare for market.
Why Online Business Value Calculators Can Be Misleading
Online calculators can give a rough estimate, but they rarely show the full picture.
They often miss local buyer demand, lease issues, owner dependence, staff risk, asset condition, stock treatment, industry demand and the quality of the financials.
A business may look strong on paper but still be hard to sell if buyers see risk. Another business may be worth more than expected because it has strong systems, steady income and good local demand.
If you are based in Townsville, our business valuation Townsville page explains the local factors that may affect your sale price.
Business Value in North Queensland
Business values can vary across North Queensland.
A tourism business in the Whitsundays will be assessed differently from a trade business in Mackay, a transport business in Townsville or a café in Cairns.
Location, industry, staff, lease terms, buyer demand and local economic conditions all affect value.
Northern Business Brokers looks at the numbers, but also at how buyers are likely to view the business in the current market.
What Can Increase the Value of a Business?
A business may achieve a stronger value when it has steady profit, clean records, low owner dependence, reliable staff, repeat customers, strong systems, good lease terms and clear growth potential.
Buyers want confidence. The easier the business is to understand, finance and take over, the stronger your position usually is.
What Can Reduce the Value of a Business?
A business may be worth less than expected if the owner is too important to daily operations, the financials are unclear, profit is inconsistent, the lease is short, key staff may leave, equipment needs replacing or the customer base is too concentrated.
These issues do not always stop a sale, but they can affect price and buyer confidence.
Should I Get My Business Valued Before Selling?
Yes. It is better to understand your business value before you list it for sale.
If the asking price is too high, serious buyers may not enquire. If the price is too low, you may leave money on the table.
A business value assessment helps you understand what price may be realistic, what buyers may question and what can be improved before going to market.
Can I Improve the Value Before Selling?
In many cases, yes.
If you are planning to sell in the next 6 to 24 months, you may be able to improve the business before going to market.
This could include cleaning up the financials, reducing owner dependence, improving systems, securing staff, reviewing lease terms, documenting equipment, removing personal expenses and preparing buyer information early.
Even small improvements can make the business easier to sell.
How Northern Business Brokers Can Help
Northern Business Brokers can help you understand what your business may be worth and whether it is ready for sale.
We can review your financials, profit, assets, stock, industry, location, buyer demand and likely sale position.
From there, we can give you a practical view of what your business may be worth, what buyers are likely to look at and what steps may improve the result before selling.
Find Out What Your Business Could Be Worth
If you are asking, “How much is my business worth?”, the best next step is a confidential business value discussion.
Northern Business Brokers works with business owners across Mackay, the Whitsundays, Bowen, Townsville, Cairns and wider North Queensland.
Whether you are ready to sell now or just want to understand your options, we can help you get a clearer view of your business value.
Contact Northern Business Brokers today to discuss what your business may be worth.
Frequently Asked Questions
How do I calculate what my business is worth?
Most businesses are valued by looking at maintainable earnings, applying a suitable market multiple and then considering assets, stock, risk, buyer demand and industry conditions.
Is business value based on profit or revenue?
Most buyers focus on profit, not revenue. Revenue matters, but a business with high revenue and low profit may not be worth as much as a smaller business with strong earnings.
What multiple is my business worth?
The multiple depends on the industry, profit level, risk, systems, owner involvement, staff, location and buyer demand. There is no single multiple that applies to every business.
Are assets included in the sale price?
Sometimes. Some assets are included because they are needed to run the business. Stock, surplus assets or property may be treated separately depending on the sale structure.
Can I sell my business if the financials are messy?
Possibly, but unclear financials can reduce buyer confidence. Clean financial records usually make the business easier to sell and easier to support at the asking price.
When should I get my business valued?
Ideally, before you go to market. If you are thinking about selling in the next 6 to 24 months, getting a value discussion early can help you prepare properly.
Can Northern Business Brokers help me sell after the valuation?
Yes. If you decide to sell, Northern Business Brokers can help prepare the business, position it to buyers, manage enquiries, negotiate terms and support the sale process.
Northern Business Brokers 