What is a business valuation?

The short definition: market value

Most business valuations in Australia estimate market value: the price a willing buyer and a willing seller would agree on, both reasonably informed, neither forced to deal, and dealing at arm's length. Australian courts have used this test for more than a century, and the ATO's guidance on market valuation for tax purposes starts from the same idea.

It is not the price you would like, the price a desperate seller would accept, or the premium one buyer might pay because your business slots neatly into theirs. It is a hypothetical deal between typical, sensible parties, so the answer does not depend on who is at the table. Our guide to business valuation in Australia shows how the test is applied in practice.

Some documents use a different basis. A shareholders agreement might call for 'fair value' or set its own formula, and a valuation done under it should follow that wording.

Three things every valuation pins down

• What is being valued. The whole business, all the shares in a company, a 30% shareholding, units in a unit trust, a partner's interest or goodwill alone. Each can produce a different number.
• The valuation date. Value moves with trading results and market conditions, so a valuation is fixed to one date.
• The purpose. A sale, a shareholder exit, a restructure, a capital gains tax (CGT) event or succession planning. Purpose shapes what the report has to address.

What a valuation report contains

A valuation report is more than a figure on letterhead. Its job is to let someone who was not in the room, such as your accountant or a buyer's adviser, follow the reasoning and test it. A full report generally covers:

• Scope and instructions: who engaged the valuer, the purpose, the interest valued, the valuation date and the basis of value.
• Information relied on: financial statements, tax returns, management accounts, leases and key contracts.
• A business overview: what it does, its customers, people, risks and industry.
• Financial analysis: several years of results, adjusted for one-off items and owner-related costs, such as a below-market owner's wage or a family car run through the books.
• The method, why it suits this business, the workings, and a cross-check where the evidence allows.
• Key assumptions and limitations, so you can see what would change the answer.
• The conclusion: a single value, or occasionally a narrow range, at the valuation date.
• A statement of the valuer's independence and the valuer's signature.

At Independent Business Valuation, every report is prepared and signed by a suitably qualified business valuer at Valuation Group. Guided by APES 225 Valuation Services. Before the final report, the client signs a representation letter confirming the information supplied, because a valuation is only as reliable as the records behind it.

The main methods, such as capitalised earnings, discounted cash flow and asset-based approaches, are explained on our business valuation methods page, and the working steps in how to value a business.

Valuation, appraisal, broker opinion or calculation?

Plenty of people will put a number on your business. The labels sound alike, but they rest on very different amounts of work and independence. Before you rely on a figure, ask what kind it is.

The word 'appraisal' is used loosely. Many brokers use it for a listing estimate, prepared as part of winning the job of selling your business. A broker paid a commission on the sale plays a different role from an independent valuer, and you should know which one you are dealing with.

A calculation is not a cheaper valuation report

A calculation engagement can suit early planning, but it is not a full valuation report and should never be presented as one. We tell you in writing which one you are getting before you engage us.

Who uses a business valuation, and why

A valuation earns its fee when a decision or a tax outcome depends on a number nobody can look up:

• Selling or buying. A seller wants a defensible view before setting a price; a buyer wants to avoid overpaying.
• Shareholders and partners coming or going, often under a shareholders or partnership agreement.
• Succession and estate planning. Passing a business on, or treating children fairly when only some work in it.
• Restructures and related-party transfers, where tax law may use market value instead of the price actually paid.
• Capital gains tax events. Gifts, some deceased estates and the small business CGT concession tests can turn on market value. Your tax adviser decides whether they apply.
• The 1 July 2027 CGT changes. For Australian resident individuals and trusts with at least one eligible beneficiary, assets held at that point are generally treated as sold and bought back at market value just before 1 July 2027. The Government is preparing an apportionment method that may be chosen instead (still a draft in October 2026). Companies are outside that rule, although assets held since before 20 September 1985 are reset under a separate rule. A valuation as at 30 June 2027 is one option, not an obligation.
• Accountants who want an independent figure on a client file rather than preparing one themselves.

What a business valuation is not

Not tax advice

A valuer establishes value. Whether you need a valuation, which tax rules apply and how the figure goes into your return are questions for your tax adviser. We do not give tax, legal or financial advice.

Not a promise of a sale price

Market value assumes a typical buyer on a single date. A real sale can land above it, when a strategic buyer pays for synergies, or below it, when the owner has to sell quickly. A valuation tells you what the evidence supports, not what an offer will be.

Not a stamp of approval from the ATO

Australia has no formal admissions board for business valuers, and the ATO's guidance says acceptability usually depends on the process: a suitably qualified, objective valuer, a recognised method and credible evidence. The ATO may review any valuation that affects your tax, and responsibility for a defensible figure stays with you.

Not a court report, unless engaged as one

A report prepared for commercial or tax purposes is not a court expert report. Courts and tribunals place extra duties on expert witnesses, so that work is a separate engagement with its own fee.

Not a valuation of your home or other assets

Independent Business Valuation values businesses and ownership interests only, not homes, investment properties, vehicles or possessions. Where a business owns land or buildings, the report may draw on a separate valuation of that real estate.

What it costs and how long it takes

We charge one fixed fee of $999 + GST for a full valuation report on one business or ownership interest with annual turnover under $10 million, never billed by the hour. Larger and more complex matters are quoted in writing.

Each additional valuation date is $495 + GST and each additional entity or interest is $795 + GST. 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.

Delivery is 2 business days for turnover under $2 million and 3 business days for turnover $2 million to $10 million. 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. Tell us your deadline and we will tell you on the call whether we can meet it.