Small business valuation for owner-run businesses

What makes a small business different to value

In a small business the owner is often the manager, the best salesperson, the main tradesperson and the bookkeeper. The accounts mix the return on the owner's labour with the return on the business itself. A sound valuation pulls those two apart.

Value is generally assessed from the point of view of a hypothetical buyer who is willing but not anxious and fully informed. If the profit only exists because you work 60 hours a week for a modest drawing, part of that profit is really your wage.

When owners usually ask for a value

• Selling, or answering a buyer's approach: see business sale valuation.
• Bringing in a partner, or buying out a co-owner.
• Handing the business to family or staff: see business succession valuation.
• Moving from a sole trader into a company or trust, where your accountant may need a market value: see business restructuring valuation.
• The 30 June 2027 CGT changes, where your tax adviser decides a valuation is the right approach.
• Planning: knowing the number early, so you can work on what moves it.

Family law property settlements are prepared through our dedicated family law practice, Family Law Valuations. For how a valuation works in general, from the methods to what the report contains, see business valuation in Australia.

Normalising the owner's wage and other adjustments

• Sole traders and partners: the owner is not an employee of the business, so the profit and loss usually shows no wage for the owner at all.
• Companies: a director may take a small wage and the rest as dividends, or a large wage to suit a tax plan. Either way, it rarely matches the market cost of the role.
• Trusts: distributions to family members are a share of profit, not pay for work done, so the accounts may show no cost for the person running the business.

We replace whatever the owner takes with what it would cost to employ someone to do the job, including superannuation, for the hours you really work. Then come the other lines a buyer would question: personal expenses, family members paid more or less than their work is worth, related-party rent away from market, one-off costs and income that will not repeat.

A modest wage and a strong profit can hide the fact that the business is really a well-paid job. The owner's wage is often the largest single adjustment, so every adjustment is shown with its reasoning.

Key-person risk: how much leaves with you?

Two businesses can report the same adjusted profit and be worth very different amounts. The difference is usually how much of that profit depends on the owner.

Where dependence is high, we reflect it in the risk applied to the earnings, and may separate personal goodwill, tied to you and unlikely to transfer, from business goodwill that stays when you go. If you plan to sell in a few years, this shows where to start: hand client relationships to staff and make yourself less essential.

Goodwill versus assets

The value of a going business is usually its tangible assets (equipment, vehicles, stock and working capital) plus goodwill. Goodwill is the extra a buyer pays because the business earns more than a fair return on those assets.

In a small business, goodwill can be most of the value or none of it. Once a market wage is paid to the owner, some businesses earn little more than their assets would justify, so the value sits close to what the assets would fetch and goodwill may be nil. That is not a failure: it is often a good job that you own.

The split also matters in an asset sale, where the contract allocates the price between goodwill, plant and stock. That can have tax and duty consequences your accountant or lawyer will advise on. When goodwill alone is the subject, see business goodwill valuation.

Sole trader, company or trust: what is being valued

The business is the same whichever structure holds it, but the thing being valued changes.

Shares can be worth more or less than the business because of surplus cash, debts and shareholder loans in the company. For part of a company, see private company share valuation; for a trust, see trust business valuation.

Small businesses and 30 June 2027

From 1 July 2027 the 50% CGT discount for Australian resident individuals and trusts (including individuals' shares of partnership gains) is generally replaced, for gains that build up from that date, by cost base indexation, and resident individuals pay at least 30% tax on those gains, with some exceptions. Australian resident individuals, and trusts with at least one eligible beneficiary, holding CGT assets at the end of 30 June 2027 are generally treated as selling them just before 1 July 2027 and buying them back, by default at market value.

For a sole trader, that can include the goodwill of the business. For a company owner, it is the shares held by you or your trust: companies can't use the 50% discount, so the rule does not apply to the company's own post-1985 assets.

A valuation is one way to work out that amount, not the only one. The law lets the Government set an apportioning method instead, but it is still a draft (released for consultation in August 2026, not yet final). If it is made, it would be chosen in the return for the year the asset is sold, so whether you need a valuation is your tax adviser's call. A valuation as at 30 June 2027 is prepared after that date, once your records to 30 June 2027 are available. You can book your place now.

The small business CGT concessions continue, and tests such as the maximum net asset value test rely on market values. See CGT business valuation 2027 and small business CGT concessions.

What the full valuation includes

Turnover under $2 million: $999 + GST, for one business or ownership interest with financial statements available. The fixed fee applies once we confirm the interest, purpose, structure and records fit the fixed-fee scope. Anything outside it is quoted in writing before we start. Fixed fee, confirmed in writing before we start. No hourly billing and no surprises.

• A written scope confirming what is being valued, the purpose and the valuation date.
• A review of your financial statements, usually the last three years plus the current year to date.
• Normalised earnings, with every adjustment shown and explained.
• An assessment of key-person and other risks, and how they affect the value.
• The method chosen and why, with the supporting analysis.
• Key assumptions and limitations, and a conclusion of value at the agreed date.
• Review, and a report signed by a suitably qualified business valuer at Valuation Group.

Delivery is 2 business days. Delivery time starts once payment and all required information have been received, and pauses while we wait for answers to our questions or your signed representation letter. Before the final report, you sign a representation letter confirming the information you supplied. Documents come only through the secure upload link on your matter, never by email.

Each additional valuation date: $495 + GST. Each additional entity or interest: $795 + GST. If turnover is $2 million to $10 million, the same fixed fee applies, with delivery in 3 business days. Delivery time starts once payment and all required information have been received, and pauses while we wait for answers to our questions or your signed representation letter. See business valuation cost.