How to avoid the most common error with business valuations

A commonly made mistake when valuing a business is taking the approach to valuations the wrong way around.  Being aware of this and knowing the right way to go will improve the accuracy of your advice to your clients.

The issue arises from the attempt to value goodwill of the business separately from the assets.

At first glance this statement could sound a bit illogical. Isn’t that what needs to be done?

Establish the value of goodwill in order to establish the value of the business as a going concern? The answer is a big NO.

The only way to calculate the value of goodwill is exactly the opposite.

Where the standard for a valuation is ‘fair market value’ then the valuer needs to calculate the value of the business as a going concern first.  Meaning market value of the enterprise taking into consideration and including tangible assets, goodwill, working capital, stock and any other components and then work backwards to arrive at the value of goodwill.

The reason for this is that the value of the business is driven and dictated by the market and market forces. Buyers on the open market calculate value of the business based upon enterprise value. This means total investment necessary for acquisition. To understand this in a bit more detail lets look at the following hypothetical example.


At the same time there are two competing business for sale on the market. The two businesses are very similar except that the value of the assets in one is larger than the value of the assets in the other.

Business 1:

Returns a profit of $100K EBITDA  (P) and has plant and equipment value of $250K (A)

Business 2: 

Returns a profit of $100K EBITDA (P) and has plant and equipment value of $100K (A)

A willing buyer is looking for a return on his capital of 25% (I) 

So the formula for calculating value from a buyers point is P/I=Value

The formula for calculating goodwill will be Value – A

Business 1:

Value = $100K/25% = $400K

Goodwill = $400K – $250K = $150K

Business 2:

Value = $100K/25% = $400K

Goodwill = $400K – $100K = $300K

In both cases the value of the business is the same but the goodwill value in example 1 is $150K compared to example 2 of $300K. That is 100% higher in business number 2!

Due to this, in the two examples above, if the value is calculated differently by calculating the value of the goodwill, which would be the same,  then adding assets on top of it, the business value will be different by $150K. This is a 25% higher valuation for business 2 than business 1 that real buyers would price identically.

The value of the physical assets don’t necessarily have an impact on business operations and business value. The value of the business assets could be different due to management decisions, market forces at the time of purchase of those assets etc. Businesses can be over or under capitalised but this does not increase or decrease the value of the business.

In real life the error is made even bigger due to inexperienced valuers adding the value of the inventory on to their calculation and ignoring working capital completely which buyers include in calculating their total investment.

Larger the asset component, the larger the potential error.

Further more the most common method used for this incorrect calculation of goodwill is the capitalisation rate method. Most valuations that I have seen done this way usually don’t have a strong case for the rate used for the calculation which makes the valuation even more inaccurate.

The value of the goodwill in fact has nothing to do with the value of the business. It is actually a  derivative of business value.

Zoran Sarabaca

Registered business valuer, Principle of Xcllusive.

15 years experience in sales and valuation experience.

Xcllusive Business Sales provide business sales and valuation services Australia wide for SME’s up to $10million in value.
Call today for more information 1800 VALUE 1 (1800 825 831)

Advice to business sellers from two award-winning business brokers

Caption: (L to R: Denise Hall, Robert Hurst and Choon Ng from Xcllusive Melbourne office)

Honesty, proactivity, industry knowledge and realistic expectations: the four most important requirements for a successful business sale, according to award-winning business brokers Choon Ng and Neill Van Der Walt.

Walking the talk not only secures excellent results for their happy clients but also scored these two Xcllusive Business Sales brokers some much-deserved recognition at awards  gala nights. Choon was named Real Estate Institute of Victoria (REIV) Business Broker of the Year, whilst Neill was awarded the Australian Institute of Business Brokers (AIBB) National Rising Star Broker of the Year.

Of course, it’s great to win awards but that’s not what it’s all about for Choon and Neill.

“We are operating in a very challenging market at the moment for business sellers and purchasers, and the award is really a recognition that we are doing something better than others in this demanding environment. I am fortunate to have the support of a strong team at Xcllusive, giving me the confidence that our clients are getting the best possible result when it comes to selling their businesses,” Choon said.

“At a personal level, I am committed to providing my clients with as much certainty as possible when I work with them. This is built on trust that I will do the right thing by them. A foundation of trust is being able to tell the clients what they need to hear not what they want to hear. This is definitely critical as most business owners do not have previous experience with the sale of businesses, and they really need to be guided, encouraged and not distracted throughout the sale process in order to achieve the best outcome.”

Education and Experience

Choon believes there’s a lot more to becoming a successful business broker than people may think. Education and experience are key in his opinion.

“Education and experience definitely helped me be a better business broker. I find it relatively easy to ‘get it’ in terms understanding the businesses my clients have engaged me to sell. This allows me to identify and communicate effectively the value drivers from the perspective for business buyers and sellers. The system-thinking and problem-solving mindset have enabled me to guide my clients in navigating the pathway from the start to completion of the transaction, minimising surprises, resolving issues and achieving the best possible outcome.

“Whilst the majority of business brokers tend to specialise in the sale of small businesses within retail, franchise or hospitality,  most do not have the experience across many industries. It is not easy to sell a business if one does not really understand the business or industry. My clients benefit from my broad skills and expertise as I know how to package and sell their businesses. My broad exposures to different industries also allow me to access a greater network and pool of active buyers and investors in the market for my clients.”

Unfounded Fear

Many business owners or business purchasers are selling or buying businesses for the first time and brokers should understand that, said Choon.

“There can be a lot of unfounded fear associated with the process. A business seller or buyer will likely be taking advice from professional advisors such as accountants and solicitors; imagine if we have a business seller with the advisors on one side, and a business buyer with the respective advisors on the other side of a transaction, and both sides are working on getting the best outcome from their own perspective. The process generally leads to a huge level of uncertainty, stress and time wastage before both sides can reach a mutual agreement.

“Therefore, I believe that to get the best results for my client, every step in the process must be attended to in order to minimise surprises. These include:

  • Understanding my client’s circumstance and expectation at the stage of the engagement
  • Understanding the business, its operation, the industry, the risks, the potential
  • Understanding the motivation of an interested party to buy a business
  • Encourage communication between all parties so issues are addressed as early as possible
  • Keep everyone updated with regular feedback throughout the process
  • Managing the process so that both seller and buyer can develop the trust and  work together to reach a mutually happy ending

“I do not have any secret, but I believe the magic bullet is to find the most motivated buyer for my client’s business and help the interested buyer to understand the business so that they can buy with confidence,” said Choon.

Honesty is Everything

Neill van der Walt agrees. The biggest buzz for him is making that process as easy and stress-free for his clients as he can and getting them the very best results possible. He feels very strongly that you must be honest and ‘do the right thing’.

“I got involved with business broking after the sale of my last business. I understand the roller-coaster ups and downs buyers and sellers go through.  Selling a business is stressful and emotional at the best of times,” said Neill.

“Honesty pays. I see some brokers listing businesses at unrealistic prices and promising the world in order to win the listing. In my opinion, this practice raises unrealistic expectations and is not in the best interest of the client. I believe our analysts provide an all-round service in this regard and work with sellers to achieve realistic expectations.

“Sellers should have realistic expectations about what can reasonably be achieved in the market. Therefore, as brokers, we need to be honest and frank around pricing businesses for the market.  A disillusioned seller will get frustrated with the process if their expectations are set at unrealistic levels.”

Proactive and Positive

That’s excellent advice from Neill. What else does he think is important?

“Being proactive and on the ball, I think is the most important. Being knowledgeable about the process is key, too. A broker should be in a position to advise both buyers and sellers of the next steps and how to progress the process.

“I am also a BAS Agent and have advanced experience in XERO and MYOB. This means I can get the reports needed from accounting systems to enable me to gather information for buyers in their quest to learn more about a business.”

Brokering a business is not like selling a house; it requires not only in-depth knowledge of the market but also experience across many other disciplines. Not all brokers have these credentials, so it pays to ask when choosing your broker.

Neill has experience in sales, marketing, finance, accounting and insurance. He also has 20 years’ corporate experience and eight years’ experience running his own business.

Realistic Expectations

“My background is ultimately marketing technical concepts in financial planning, insurance and investment products. In view of this, I understand that things need to be simplified and broken down into easy-to-understand concepts.

“It takes anything between three and six months to sell a business. The timeframe for selling should be communicated upfront and expectations should be set around this.”

Neill believes that Xcllusive Business Sales offers many points of difference from other brokers.

“When going to market, it is crucial to have excellent marketing support, so as many potential buyers as possible see what you’re offering. This gives the seller the best opportunity to have their business looked at. In my opinion, Xcllusive must have the best marketing and system support in Australia. Our database usually yields enquiries in the first week which gives us a head start for our clients in a new listing campaign.”

Stopping Deals from Crashing

Brokers must be on the ball, proactive and prompt in dealing with buyers and must continuously push the process to completion. If the process takes too long, the chances of deals falling through are greater.

“A broker should be highly adaptable to the environment, people and situations. Every business you take to market is vastly different from the next. You deal with questions from accountants, lawyers, family members and friends ‘in the know’, all with various levels of intensity. Combine all of this with emotions, and you understand why you must be sensitive and understanding,” said Neill.

“I am fortunate in that I have a very good understanding of accounting and the full effect across a P & L and B/S. This often leads to many questions I can ask prior to going to market, so I am able to position reasons why things are what they are.”

Talking to Neill, it’s easy to see that he loves what he does and puts his heart and soul into getting the best results for his clients. Isn’t that the type of broker you need on your side?

“I enjoy the diversity of it all. I also enjoy learning about the business models and seeing the effect they have on the bottom line.

Ultimate Accolade

National Real Estate awards showcase the best of the property industry and celebrate leading real estate agency practices and professionals. Winning an award is no small feat!

The awards recognise and reward members who have gone that extra mile in pursuit of service, ethics and great results.

REIV President Robyn Waters said the calibre of entries just gets better every year.

“We all know that real estate is a competitive business and the award submissions are testament to the individuals and agencies who demonstrate innovation, determination and passion in securing the best results for their clients,” Ms Waters said.

Despite knowing that he does an unbelievable job for his clients, Choon was still surprised to be named Business Broker of the Year.

“I missed the opportunity to attend the award evening due to a prior interstate business commitment. However, it was a fantastic surprise when I received the news of winning the award that same evening from REIV via email. I must admit I checked the email very carefully as I thought it might be some sort of online scam! It took me until the next day to confirm that it was authentic!”

Article by: Isobel Coleman


Business Broker of the Year 2018 Award REIV

We are excited to announce Choon Ng from Xcllusive Melbourne has won the “Business Broker of the Year 2018″ Award for the Real Estate Institute of Victoria (REIV).

The REIV Awards for Excellence showcase the best of the best in the industry and celebrate leading real estate agency practices and professionals.

Choon is a valuable member of the Xcllusive team and your industry experience, knowledge and high level of service to your clients is something to be proud of! Congrats Choon! #reiv #reivaward #reiv2018 #broker #businesssales #xcllusive #teamxcllusive


NSW Business Chamber Regional Awards 2018

Peter George accepts the award on behalf of Zoran Sarabaca.

On Tuesday the 17th of July Xcllusive Business Sales attended the NSW Business Chamber Regional Awards night for 2018.

The awards celebrates business excellence in NSW by recognising and rewarding outstanding businesses whose passion, determination, innovation and success inspire other businesses and business people.

The Xcllusive Team proudly took home the award for Outstanding Business Leader for our region.

We are super excited to progress as a State Finalist to the 2018 NSW Business Chamber State Business Awards on Friday 23 November at Luna Park, Sydney.

It’s an honour to be recognised for the dedication and hard work that our team puts into delivering such a high level of service, trust and expertise to our clients and to help them sell their business with Certainty!

Here are just a few of our photos from the evening – thank you to the NSW Business Chamber for hosting an enjoyable evening celebrating the best in business!




Photos courtesy of the NSW Business Chamber 2018.


Business Champions Finalists for 2018

Xcllusive have been recognised as a Champions Finalists for 2018. We are super excited to be finalists and look forward to joining everyone at the Awards night in April. A big shout-out to our Team, Clients and Partners that help make Xcllusive a success!


Xcllusive Events and Seminars for 2018

We have many events scheduled for 2018 and if you would like to find out when an event is happening in your area visit Eventbrite for Details.

Our next Free Events are in Albury and Newcastle called: How much is your business worth?

If you would like to know more you can visit:

If you are an Accountant or Solicitor and would like to co-present with us at a Seminar contact Sophie on (02) 9817 3331 or email [email protected]




How to price your business without ruining your business sale.

Let’s just get this out of the way: there is no one-size-fits-all formula for pricing your business. Anyone who tells you that there is, is probably about to ruin your chances of selling your business at its full value. 

And here’s why: the price at which you take your business to the market is one of the main determining factors that can lead to a successful business sale. Your advertised price has a huge affect on everything from:

  • Your target market,
  • The perceived return on investment,
  • The availability of finance,
  • Your buyers’ level of trust in your business,
  • The calibre of buyers you attract,

… and most importantly; it has serious implications when you get to the negotiating table.

All of those things put together can have a massive affect on your business sale so, quite simply, if your business price isn’t a strategically calculated figure, you’re shooting yourself in the foot. It can be the difference between selling and not selling.

So, given that minefield, how do you calculate how much your business is worth?

To begin with, you aren’t going to be able to do it without help. I should probably also say, given what we’ve already said, that you aren’t going to be given a formula at the end of this blog with an answer. What this blog does however, is point you in the right direction. 

Here’s our recommended first step on how to value your business:

Most people’s first thought is to either get a business valuation or to get their accountant’s opinion. Though these are good options, there’s a much quicker (and cheaper) way to get some fairly accurate estimates.

My recommendation for the best first step would actually be to approach some business brokers for an appraisal. Now, this might seem a little self-serving (given that we are business brokers), but it is my genuine opinion (Plus, most good agencies will put together an appraisal for free).

Most business brokers’ appraisals are obligation free and business brokers are uniquely positioned in that they have first hand access to what businesses are selling for in the current market. Furthermore, if they are a reputable broker, the appraisal they give you will be geared towards a realistic selling price. Why? Because it’s in the broker’s best interest to advertise the business at the right price so they can sell it and get paid!

IMPORTANT: Picking the good agents from the bad is core to getting a good appraisal. Make sure you read to the end for tips on how to pick the right agents to produce your appraisal. 

The reason you need to go to multiple brokers is that you want to get at least three price opinions for your business. If they’re all around the same price then your pricing decision will be easy. If however, the appraisals all come back very different then you’re going to need to make some hard decisions. Without business valuation training, the absolute best test you could do is the age old ‘sanity test’. This is a real test that even valuers use, but you can do it yourself.

For each appraised price, you need to put yourself in a buyer’s shoes and answer the following question as unemotionally and honestly as possible:

 ”Knowing what I know about my business;
its profits, advantages, disadvantages, benefits and drawbacks;
whilst considering the current economic climate and industry conditions
and comparing it to other businesses and investment opportunities…
would I pay this price for it?”

If your answer is a very quick ‘Yes’ without too much thought, then the price might actually be a little low.

If your answer is a resounding ‘No; I would invest this money elsewhere, then the price is likely too high.

If however your answer is something more like ‘Yes, but only after thorough investigation and serious consideration’, then you have likely found a reasonable asking price.


So, is that it? Well, yes and no. No, because of course you could study up and read through all 1000+ pages of a very thick and heavy valuations manual… but if you’re like most business owners I know then the hundreds of hours required to do so are not really available to you. Otherwise, the process described in this blog is the very process that I used to sell my own business before becoming a business broker (and before reading through all 1000+ pages of a very think and heavy valuations manual).

There’s no way to know exactly how the market will react to your price, so remember; listen to the market. All buyers will likely have concerns over price (obviously), but if buyers are telling you that the business is way over-priced and they are not interested in taking it further, then you need to be prepared to react to that feedback.

Do that, and you’ll be lightyears ahead of your competition.

Good luck!

By Zoran Sarabaca
Principal Xcllusive Business Sales Pty Ltd
Sell your business with Certainty.

PS. IMPORTANT: Read this to help you pick the right brokers for the appraisal.


The main variable of this whole exercise is picking the right brokers to appraise your business. Not all appraisals are created equal and you do need to be picky with the brokers who’s appraisals you trust. Here are four quick tips to help you pick the right brokers to approach for a good appraisal.

  • Any good appraisal requires financial documents to produce. If the broker doesn’t ask for them, then find an agent who does.
  • Stick to agencies with a low business to agent ratio. Do this by counting the number of businesses listed on their website and dividing it by the number of agents they have. If the website has 1000 businesses and only three agents, then those agents are not going to have the time to focus on individual businesses and as a result will often over quote business prices simply to list more. An over quoted price is not what you’re looking for.
  • Avoid agencies with what appears to be very overpriced businesses. Take a look at their listings page, and if their prices make you scoff then maybe give them a miss.
  • Avoid agencies with very high engagement fees. As of 2014, agency engagement fees up to about $2,500 – $3,000 are totally acceptable. If the brokerage is charging you $5,000 – $10,000 just to sign up with them, then their financial incentive is at the front end of the deal. This means that they make their money by signing you up as opposed to selling your business. Under these circumstances it is actually in their favour to over-quote you in order to sign you up and get the engagement fee.

Remember, this tip list is mainly to help you find the right agents to appraise your business. It’s not a be-all-end-all to help you choose the right broker… but it’s a good start.

DISCLAIMER: The information contained in this blog is for information purposes only. It is not meant to be considered as business advice. The points of view expressed represent reactions to the current business market and it should be noted that the market may be subject to change in the future. Reader’s specific circumstances may be different and have not been taken into consideration. Always consult with your professional advisors for any business advice.

The truth about overseas business buyers: What you need to know about ‘overseas buyers’ with ‘deep pockets’.

On the road to selling your business you will likely come face to face with someone claiming that they can sell your business to an overseas buyer for more than it is worth. Despite recent actions taken by the ACCC against unscrupulous vendors (1) making these claims, the myth about overseas buyers continues to plague business sellers.

Advertising overseas will cost as much if not more than it does in Australia and knowing the truth about overseas buyers could save you a lot of wasted money.

So, if you’re thinking of selling your business through a business agency now or at any time down the road, take the time to arm yourself with the myths and facts about overseas buyers.

Myth: Many overseas buyers are willing to pay up to three times what a business is worth.

Fact: If somebody has enough money to pay three times a business’s value you can assume one thing about them: They have a lot of money. There are only a handful of ways to get a lot of money, and most of them revolve around being a savvy investor and/or a good business person, neither of whom would even think about paying three times anything’s value.

Myth: The overseas market is brimming with buyers for the Australian market.

Fact: Though there is a chance of selling to an overseas buyer, unless you are a major international, that chance is insignificantly remote. In fact, one of the sites we use to sell businesses have portals in France, Germany, Hong Kong, Italy, Luxembourg and new Zealand. So technically we advertise businesses for sale in an overseas forum. So why don’t we advertise that we have ‘overseas buyers’? Because the number of overseas buyers is infinitesimally smaller than the number of local buyers and it would be close to unethical to even mention them.

So, knowing what you know now, exactly what percentage of businesses do you think actually sell to overseas buyers? Based on a survey of the Australian Institute of Business Broker’s 353 Members, in the 2012 financial year only 2.6% of businesses were actually sold to overseas buyers or to overseas entities.(2)

In summary, only a tiny, tiny fraction of buyers come from overseas. The ones that do aren’t looking to bankrupt themselves to get a visa, they are good business people and they have the time to be picky. So in short, if anybody tells you they can sell your business for more than its worth to overseas buyers, they’re probably not the business agent for you.

By Zoran Sarabaca

Have you ever been told by an agent that they can sell your business to an overseas buyer? OR have you actually sold your business to an overseas buyer? We’d like to here from you!

To find out more about this topic or if have any questions about business sales make sure you give us a call on (02) 9817 3331 or submit a response or enquiry through the site. We look forward to talking to you.

Disclaimer: The information in this article is intended as information only and should not be taken as professional business advice.



Xcllusive Business Club

Grow, Systemise, Keep, Sell and Drive PROFITS

Register for ONE of our FREE Information Sessions below:

Thursday 16th of November – 8.30am to 10.30am


 Thursday 23rd of November – 8.30am to 10.30am


Aqua Luna Waterfront Dining – 461 Henley Marine Drive, Drummoyne NSW 2047


Free Seminar – Shellharbour NSW : Exit Planning and How to Prepare Your Business for Sale

Exit Planning and How to Prepare Your Business for Sale

Wednesday 11th of October 2017

The Shellhabour Club

Arrive at 6.15pm for 6.30 start until 8.30 pm

(Refreshments on arrival and there will be further refreshments and nibbles following the event up until 9pm)

Thinking of selling, exiting or retiring from your business? This practical seminar will show you what you need to consider before you make the big decision. Selling a business is never easy, but this session will help you minimise the uncertainty and provide you with all the tools to prepare your business for sale.

This seminar brings to you an expert team of Business Professionals who will provide you with vital, practical and actionable information to assist you getting your Business ready for sale now or in the future!

Our three experts will discuss:

  1. How to value & sell your business – Market buyer’s value process.
  2. Taxation & Accounting Considerations – What you can do now to minimise tax on the sale of your business.
  3. How to avoid delays in the legal process - What can you do now before a buyer is identified?


Zoran Sarabaca

Xcllusive Business Sales –

Principal of Xcllusive Business Sales / Most successful agency for selling $1m to $6m businesses / Author of ‘How to sell a small business’ / Winner 2014 Best Business Strategy Award / President of the Australian Institute of Business Brokers.


Andrew Webb

Andrew Webb Family & Business Accounting  -

Owner and Chartered Accountant / Andrew has a wealth of experience from working with rural and small business clients to Australian branches of global companies, and high net worth clientele / Providing a fresh take on accounting, Andrew is interested in peoples’ stories, and looks forward to meeting you, not just your business.


Peter Franke
Stacks Heard McEwan –

Director at SHM /Peter’s specialty is in Property and Business Law / An excellent problem-solver and negotiator who provides advice with a focus on client communication and building lasting relationships / His expert advice and knowledge has helped numerous clients avoid potential pit-falls and capitalise on best possible opportunities.

RSVP TODAY to Reserve your seat - Please book early as seating is limited.


Ways to Register:

Register here at Eventbrite

Email us at [email protected]

or call Sophie at Xcllusive on 02 9817 3331
** Lucky Door Prizes on the Night – So don’t forget to bring along your Business Cards and Questions for our Presenters **