Why understanding valuation formulas isn’t enough if you want to sell for top dollar
You’ve probably heard it before: “Just multiply your profits by X and boom that’s what your business is worth.” Sounds easy, right?
But if you’re thinking of selling, here’s the truth most brokers won’t say out loud:
Buyers don’t just buy numbers. They buy stories. They buy safety.
And if they smell risk, they’ll walk, or worse, lowball the hell out of you.
The Three Things That Actually Drive Your Valuation
Yes, there are formulas. But there are also feelings.
Buyers use three filters to decide what your business is worth:
1. Profit (The Cold Hard Maths)
You can use a Profit Multiple formula to get a ballpark value.
Say you earn $150,000 net annually, and the industry gives you a 2x multiple, you’re looking at $300,000.
But most Australian businesses fall somewhere between 3x to 10x profits, depending on:
- Industry type
- Historical performance
- Growth potential
Watch our detailed breakdown here: How to Calculate Business Value in Australia
2. Risk (The Buyer’s Brain)
This is where shit gets real.
Buyers are constantly asking themselves:
“Am I walking into a goldmine… or a grenade?”
Even if your profits are strong, red flags like:
- One client making up 60% of revenue
- You being the linchpin of daily operations
- Dodgy or incomplete financials
…will tank their confidence and your price.
Want to know how to flip that? Read this: Why Business Owners in Newcastle Are Turning to Risk-Free Brokers
3. Market Conditions (The External Reality Check)
A beautifully profitable business in a dying industry?
Still hard to sell.
The market decides what’s hot, not your spreadsheet.
So ask:
- Is your industry growing or shrinking?
- Are competitors being acquired?
- Are buyers paying high multiples right now or tightening wallets?
Even a perfect valuation can be undone by poor timing.
So What Can You Do About It?
If you’re getting serious about selling, here’s the deal:
Math alone won’t save you.
Buyers want:
- Clean financials
- Independence from the owner
- Growth potential and proof of stability
- The feeling that they’re not going to inherit chaos
The smartest sellers get in front of this. They understand what buyers really see and they position accordingly.
Want to Go Deeper?
We break all of this down in a new data-driven guide: What Your Business Is Really Worth (And How Buyers Decide)
This isn’t fluff. It’s what we see in real sales, with real buyers, every week.
And if you’d rather hear it straight, watch the full video here:
Watch: How to Calculate Business Value in Australia
Need a Real Valuation?
If you’re done guessing and ready to know what your business could actually sell for our team can help.
Book a confidential valuation
Or email us direct at info@xcllusive.com.au