The short answer
Buyers value an Australian business by applying a multiple to its earnings, usually EBITDA for profits above about $1M or SDE for smaller firms. The multiple reflects risk and growth: recurring revenue, low owner dependence and clean financials push it up, while customer concentration and volatile earnings pull it down.
Key takeaways
- EBITDA is the standard earnings measure above roughly $1M profit; SDE applies to smaller, owner-operated businesses.
- Enterprise value is earnings multiplied by a multiple. A business earning $800K EBITDA at 4x is worth about $3.2M.
- Typical Australian ranges run from 2x to 4x for trade and services, up to 5x to 8x or more for recurring-revenue businesses.
- Recurring revenue, documented systems, a capable team and clean financials lift the multiple.
- Owner dependence, customer concentration and inconsistent earnings discount it.
When you finally sit across the table from a buyer, you'll hear numbers thrown around fast: multiples, EBITDA, SDE, capitalisation rates. Understanding what those mean, and what drives them up or down, puts you in a far stronger negotiating position.
The two earnings measures buyers use
EBITDA (earnings before interest, tax, depreciation and amortisation) is the standard measure for businesses generating above roughly $1M in annual profit. It strips out financing and accounting decisions so buyers can compare like-for-like.
SDE (seller's discretionary earnings) is used for smaller businesses, typically those with revenue under $5M or profit under $1M. It adds back the owner's salary and personal benefits to show the total economic benefit a working owner-buyer would receive.
Which measure applies to your business matters. If your financials are being read the wrong way, the valuation can swing by hundreds of thousands of dollars.
What a "multiple" actually means
Once your earnings figure is established, buyers apply a multiple to arrive at enterprise value. A business earning $800K EBITDA at a 4× multiple is valued at $3.2M.
The multiple reflects risk and growth potential. In Australia, typical ranges by business type look something like this:
- Trade and services businesses: 2–4× SDE
- B2B professional services: 3–5× EBITDA
- Manufacturing and distribution: 3.5–5× EBITDA
- Technology or recurring-revenue businesses: 5–8× EBITDA (or higher)
These are starting points, not outcomes. Every deal is different.
What moves the multiple up
A buyer's multiple is essentially a price they're willing to pay for certainty. The more predictable and transferable your business is, the more they'll pay. Key value drivers include:
- Recurring revenue: subscriptions, retainers or long-term contracts reduce risk significantly.
- Documented systems and processes: a business that runs from an operations manual is worth more than one that runs from the owner's head.
- Diverse customer base: no single customer accounting for more than 15–20% of revenue is a strong position.
- A capable management team: if the business can operate without you for 12 months, that's a premium asset.
- Clean, audited financials: buyers pay more when they trust the numbers.
What moves the multiple down
Conversely, buyers discount for risk. Common discount triggers include:
- Heavy owner dependence, especially where key client relationships are personal
- Customer concentration, one or two clients making up the majority of revenue
- Inconsistent earnings, volatile or declining profit over the past three years
- Weak documentation, verbal processes, informal contracts, unclear IP ownership
- Pending litigation or unresolved disputes
Each of these is a reason a buyer will reduce their offer or insert earnout provisions to protect themselves.
The valuation is just the start
A headline multiple is only useful if the deal structure supports it. Many sellers focus on the price and overlook the terms: payment timing, earnout conditions, working capital adjustments and warranties can all materially affect what you actually receive.
Getting a professional valuation before you go to market gives you two things: a realistic anchor for negotiations, and the time to address value gaps before they become buyer objections.
If you'd like to understand where your business sits on the valuation spectrum today, a confidential assessment with our team is a practical first step.
Frequently asked questions
What multiple do businesses sell for in Australia?
Most established businesses trade between 2x and 6x earnings, with the exact figure set by industry, size and risk. Recurring-revenue and technology businesses can reach 5x to 8x EBITDA or higher, while smaller trade and services businesses are often valued at 2x to 4x SDE.
What is the difference between EBITDA and SDE?
EBITDA measures earnings before interest, tax, depreciation and amortisation, and suits businesses earning above roughly $1M. SDE, sellers' discretionary earnings, adds back the owner's salary and personal benefits and is used for smaller owner-operated businesses.
How can I increase my business valuation before selling?
Reduce owner dependence, build recurring revenue, broaden your customer base, document your systems and tidy your financials. Each lifts the multiple a buyer will pay, and addressing them early gives you time to close the value gaps before going to market.
