Free confidential appraisal · Queensland
The four earnings bases, the multiple, and why no range is published here
EBIT, EBITDA, SDE and adjusted net profit. What each includes, what it leaves out, and who uses it.
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The four earnings bases, the multiple, and why no range is published here
The four earnings bases, and what each one is
| Earnings base | What it includes | What it takes out | Who uses it |
|---|---|---|---|
| Net profit | Everything the accounts record, after interest, tax and depreciation, including whatever the owner ran through the entity | Nothing | The financial statements and the tax return. Two identical businesses, one with a loan and one without, show different net profits and identical operating economics. |
| EBIT | Depreciation and amortisation, so the cost of using assets up stays in the number | Interest and tax | Buyers of asset heavy businesses such as earthmoving and transport, where depreciation is a rough proxy for the capital that has to keep being spent. |
| EBITDA | Operating earnings only | Interest, tax, depreciation and amortisation | Mid market and corporate buyers, and the published Australian deal surveys. It flatters asset heavy businesses by ignoring the replacement cost of the assets that generate the earnings. |
| Seller’s discretionary earnings | EBITDA plus one working owner’s total remuneration and personal benefits | Interest, tax, depreciation, amortisation and the owner’s own package | Owner operator buyers at the smaller end, who will run the business themselves rather than pay a manager. |
EBIT and EBITDA follow ordinary accounting usage. Seller’s discretionary earnings has no statutory and no Australian standards definition, which is exactly why the base has to be written down. APES 225 paragraph 5.2, operative for valuation services commencing on or after 1 January 2025, requires a valuation report to communicate the approaches and methods used.
Which figure is multiplied changes the answer more than the multiple does
Take a business generating $500,000 a year before the working owner takes anything, where a market rate manager would cost $130,000 a year including superannuation. These are illustrative round numbers, not a figure for any business. Seller’s discretionary earnings are $500,000. EBITDA is $370,000. That is a 26 per cent difference in the base before anybody has argued about a multiple.
Run the arithmetic and 2.5 times SDE and 3.4 times EBITDA produce the same price. So four rules follow. SDE multiples are lower than EBITDA multiples for the same business, because SDE is the bigger number. SDE is only coherent where one working owner runs the business. EBITDA multiples quoted from corporate deal data do not transfer down to owner operated businesses. And whichever base is used, it has to be measured the same way on both sides, on the comparable evidence and on your accounts.
A multiple is also the inverse of a required return, adjusted for expected growth. On the arithmetic alone, paying three times normalised earnings means recovering the purchase price from earnings in about three years, which is a demanded return in the order of 33 per cent a year before growth. That is not greed. The buyer is putting undiversified capital into a single illiquid asset, signing personal and lease guarantees, relying on earnings produced by somebody who is leaving, and accepting that they cannot sell out quickly if it goes wrong.
Why no industry multiple range is published on this site
Why no industry multiple range is published on this page
Australia has no public, comprehensive database of small business sale prices. Business sale prices are private and are not registered anywhere, the way a land transfer is. Bizstats, operated by the Australian Institute of Business Brokers, holds contributed and anonymised transaction data across a stated $2 billion plus of Australian business sale value and 2,000 plus industry categories and deal types. Access is by application and it is not open to the public, so you cannot independently verify a figure taken from it. Bizstats does not publish a transaction count, a sample frame or a methodology.
The clearest measure of how thin the disclosed data is comes from a methodology note rather than from a multiple. Grant Thornton’s Dealtracker, published April 2025, analysed 1,591 Australian transactions over the 18 months from 1 July 2023 to 31 December 2024, compiled from S&P Capital IQ, the ASX, Mergermarket, IBISWorld, transaction surveys and company announcements. About 461 of those, 29 per cent, disclosed a value at all. Only about 82, roughly 5 per cent, disclosed enough financial detail to compute an EBITDA multiple. Those 82 are corporate and mid market deals, so they say nothing about an owner operated business turning over $1.5 million a year.
Five things make any published range indicative only. Selection: contributed data over represents businesses that sold, and leaves out those that were listed and did not, which biases an observed multiple upward. Definitional drift: one contributor’s adjusted net profit is another’s EBITDA. Structure: a headline price that includes stock, or is an equity price after debt, or has 30 per cent deferred over two years, produces a very different effective multiple for the same business. Sample thinness: slice a national dataset by industry, then turnover band, then state, and the cell often holds single digit observations. And time: a three year old comparable is a historical fact, not a current benchmark.
So this page names its sources, uses transaction evidence where it exists, and says so where it does not. Even ASIC’s own guidance for expert reports, RG 111 published 22 October 2020, says at RG 111.95 that an expert should usually give a range of values and at RG 111.96 that the range should be as narrow as possible. RG 111 applies to transactions under the Corporations Act rather than to an owner operated business sale. The principle still holds: a single point estimate claims precision that the available evidence does not support.
An appraisal, a valuation, and the difference that matters
What a number is worth depends on which product it is
| Product | Who prepares it | What it produces | What it is accepted for |
|---|---|---|---|
| Broker’s market appraisal | A licensed agent acting under section 26(1)(b) of the Property Occupations Act 2014 (Qld) | An opinion of likely selling price, prepared to market the business. Not a product of APES 225 at all. | Deciding whether to go to market, and setting a listing price. Not independent, because the agent would be paid on the sale. |
| Calculation engagement, APES 225 | A member of CPA Australia, Chartered Accountants Australia and New Zealand or the Institute of Public Accountants | A Calculated Value, which may be a single amount or a range, on procedures agreed with you in advance | A first, cheaper view of value. The report must state on its face that a valuation engagement may have produced a different result: paragraph 5.2(q). |
| Limited scope valuation engagement, APES 225 | Same | A Conclusion of Value, with the scope restriction disclosed | Purposes where the restriction is acceptable and disclosed. The report must carry the same warning: paragraph 5.2(p). The disclosed limitation is the first line of any cross examination. |
| Valuation engagement, APES 225 | Same | A Conclusion of Value, on the procedures a reasonable and informed third party would perform | The strongest of these where the number has to withstand a bank, the ATO, a court, or a single expert appointment in a family law property matter. |
APES 225 Valuation Services, issued 25 October 2024 by the Accounting Professional and Ethical Standards Board, operative for valuation services commencing on or after 1 January 2025. APES GN 20, issued January 2020, makes it the client’s decision which engagement type to commission, and names the factors: the reliance to be placed on the value, its significance, and whether it will be disclosed in a public document.
Why a free appraisal is not a valuation, in the standard’s own words
APES 225 paragraph 5.2 sets out what a written valuation report must communicate. Two sub paragraphs carry the point. Paragraph 5.2(p) requires a limited scope valuation report to state that if a valuation engagement had been performed the results may have been different. Paragraph 5.2(q) requires a calculation report to state the same thing.
A calculation engagement is a legitimate, useful and cheaper product. It is not a valuation, and the standard requires it to say so on its own face. A broker’s market appraisal sits outside the standard altogether. It carries no Conclusion of Value and no Calculated Value, and nobody bound by APES 225 prepared it. That is the honest description of it, and it is the reason it is free.
Independence sits over all of it. Paragraph 3.4 requires a member in public practice performing a valuation service that requires independence, or that purports to be independent, to comply with independence as defined in the standard. Paragraph 8.2 prohibits contingent fees for those engagements, and requires disclosure that the member’s compensation is not contingent on the conclusion, the content or the future use of the report. Under a Queensland Form 6A appointment, an agent’s commission depends on a contract being entered into and settlement occurring. A figure produced by a person paid on the outcome is not independent, and care does not change that.
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