How to value a business

Ever wondered what your business is actually worth?

One of the biggest misconceptions about business valuations is that there isn’t a single formula that applies to every business.

The value of a business is often based on a multiple of either revenue or EBITDA (earnings before interest, tax, depreciation and amortisation), but the multiple used can vary significantly depending on the industry, growth potential, profitability and risk profile.

A business in one industry may be valued at a very different multiple to a business generating the same revenue in another.

If you’re thinking about selling, succession planning or simply understanding your financial position, it’s worth speaking with your accountant or adviser about what valuation metrics are commonly used in your industry.

Knowing your number is the first step to improving it.

General advice only.

Amy Lehmann is an Authorised Representative (No. 1292710) of Consortium Private Wealth Pty Ltd (AFS Licence 495401).

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