Business
What Is My Business Worth?
There's no single formula for this, whatever anyone tells you online. What your business is worth starts with what it actually earns — not what you think it's worth, not what a listing site's calculator spits out, and not what someone's floated to you over coffee. From there, the number moves depending on things a lot of owners don't think to control.
Here's how it actually gets worked out.
It starts with earnings, not guesswork
The starting point for almost every small business valuation is an earnings-based approach — what the business actually generates for its owner, adjusted for one-off costs, then weighed against a figure that reflects risk and stability. That's the core of it. Revenue on its own doesn't tell you much; two businesses turning over the same amount can be worth very different amounts once you strip out what's actually left.
Size and turnover matter too. A bigger, more established business generally carries less risk than a smaller one still finding its feet, and that shows up in the number. So does the client base — a business built on a handful of large accounts is a different proposition to one spread across hundreds of smaller customers, even if the revenue looks identical on paper.
Plant and equipment — it depends what kind of business you're in
This is where a lot of owners get it wrong. If plant and equipment genuinely drives the operation — a trade business running a fleet of vehicles, for example — that gear adds real, separate value. A buyer is paying for the ability to keep operating from day one.
For most other businesses, tools of trade are just required. They're what you need to run the place, not something that adds value on top of what the business earns. A business doesn't sell for more because it owns a decent set of tools — it sells for more because of what it produces using them.
Staff factor in too, in both directions. A capable team already in place can be a genuine asset to a buyer. A business that can't function without you personally, or without one or two people who'd be hard to replace, is a harder sell — and usually a lower one.
Be careful with unsolicited offers
If someone's approached you out of nowhere with a number for your business — a competitor, a buyer, even someone well-meaning — treat that figure as the start of a conversation, not a valuation. Whoever's making the offer has their own interest in what that number looks like, and it's rarely in your favour to accept it without checking it against something independent first. An offer isn't a valuation. It's an opening position.
The Adelaide angle
Most of the businesses I look at are Adelaide metro, with a growing number across the Adelaide Hills. South Australia's business community is small enough that word travels — which cuts both ways. A well-supported number holds up if a buyer does their own checking, and a serious buyer will. A number that isn't backed by anything gets picked apart fast, and in a small market, that costs you more than time.
The honest bottom line
If you're trying to work out what your business is actually worth, the short version is: start with what it earns, understand what's genuinely adding value versus what's just required to operate, and don't take a single unsolicited figure — or a generic online calculator — as gospel. Everything else is detail specific to your business, and that detail is exactly where the number moves.
A Business Value Review ($695) is built for exactly this — a proper, independent look at what your business is actually worth, using the same judgement I'd apply if I were buying it myself.
Got a question about your own situation before you book anything? Email jarrod@jarrodosborn.au — I read every one.
Want an honest, independent read on what your business is actually worth?