By Sue Hirst, Co-Founder CFO On-Call
For business owners, understanding what your business is worth is crucial for making informed financial decisions — whether it’s planning for growth, attracting investors, or preparing to exit. A professional valuation provides the most accurate picture, but if you’re curious about where you stand, the guide below offers a practical starting point.
Use this simple, 3-step guide to estimate what your business might be worth. This is not financial advice — just a helpful tool to better understand business value using common industry benchmarks.
⚠️ Important: This calculator is a general guide only. It’s designed to give you a rough estimate based on typical profit multiples. It doesn’t replace a formal valuation. For legal, funding, tax or sale purposes, a professionally prepared valuation is essential.
How to Calculate the Value of Your Business
So let’s answer the question: How do you calculate a business valuation?
The following business valuation calculator offers a simple, three-step approach to estimating your business’s value using profit-based multiples. While not a substitute for professional advice, it’s a great way to gain a clearer picture of how your business may sit in today’s market.
Step 1: Know Your Key Financial Figures
Before you begin, you’ll need two numbers from your business’s financial statements:
- Annual Revenue – This is the total amount of income your business has earned in the past 12 months before any costs or expenses. It’s sometimes referred to as annual turnover and usually sits at the top of your Profit & Loss (P&L) statement.
- Net Profit or EBITDA – This is what your business keeps after paying for regular expenses like wages, rent, and overheads.
EBITDA stands for Earnings Before Interest, Tax, Depreciation and Amortisation. While it’s commonly used in business valuation methods, for simplicity, you can use your net profit figure.
Net profit is typically the bottom line on your P&L — the money left over after all day-to-day costs, including some interest payments.
If you’re unsure where to find these figures, your accountant or bookkeeper can guide you through your balance sheet and cash flow reports.
Step 2: Estimate Using a Common Valuation Method
One of the most widely used business valuation methods for small and medium businesses is the income-based approach. It multiplies your profit by a typical range based on market conditions and industry trends.
For many businesses, a common method is:
2.5x to 3.5x Net Profit or EBITDA
Example:
If your net profit is $250,000:
- Low estimate: $250,000 × 2.5 = $625,000
- High estimate: $250,000 × 3.5 = $875,000
Estimated valuation range: $625,000 – $875,000
This gives you a rough idea of your current market value, which can be further refined based on qualitative factors.
Step 3: Consider the Factors That Influence Your Value
Every business is different. While the basic calculation gives you a starting point, certain factors can significantly influence your final value:
- Consistent revenue growth over time
- Ability of the business to operate without the current owner.
- Strong profit margins with future profit potential
- Recurring or subscription-based cash flows
- A diversified customer base (not reliant on one major client)
- Ownership of intellectual property or unique intangible assets
- Potential for expansion in new markets or industries
- Clear operational structure and efficiency
- Strong business history and stable management team
The more value drivers your business has, the more likely it is to attract potential buyers and achieve a higher price.
Why Would You Get a Business Valuation?
Business valuations are essential at key points in a company’s journey. Common use cases include:
- Selling a business – to set a fair selling price based on actual value
- Mergers and acquisitions – to negotiate terms with confidence
- Raising capital – to attract investment based on realistic expectations
- Strategic planning – to make data-driven financial decisions
- Succession planning – to prepare for transitions or exits
- Understanding net worth – to support estate planning or insurance
An accurate valuation can also help with identifying risks involved in your business or industry and shaping a more informed business plan.
How Professional Business Valuations Work
There are three widely recognised business valuation methods used by professionals:
- Asset-Based Approach – Adds up the value of tangible and intangible assets (e.g. business premises, inventory, fixed assets, brand equity), then subtracts liabilities to calculate net asset value
- Market-Based Approach – Compares your business to similar businesses or businesses recently sold, using data from the current market. A business broker may assist with this process
- Income-Based Approach – Focuses on your ability to generate future cash flows, typically using discounted cash flow (DCF) models or applying a profit multiplier
The right approach varies depending on your financial situation, business assets, and industry.
Why a Professional Valuation Matters
A DIY estimate is a good starting point — but it’s no substitute for expert insight.
⚠️ You could undervalue your business and lose out when selling
⚠️ You might overestimate and miss opportunities or funding
⚠️ You may overlook hidden assets, liabilities, or intangible value
Working with a Virtual CFO ensures you understand both the current and future value of your business, backed by expert analysis and real-world experience across a range of industries. It also considers your balance sheet, asset valuation, business plan, and financial statements holistically — something an online calculator can’t fully do.
Get a Trusted, Professional Business Valuation — Starting from $3,000
At CFO On-Call, our virtual CFOS don’t just calculate a value — they provide a clear roadmap to help you grow it. Whether you’re preparing to exit or planning to improve your business, we’ll help you accurately secure your true value in today’s market.
Our business valuation services include:
- A breakdown of your business’s current market value
- Analysis of key value drivers and hidden risks
- Identification of tangible assets and liquid assets
- Strategic insights to increase your value over time
- Comparison with similar businesses in your industry
- One-on-one support from an experienced Virtual CFO who knows how businesses operate and scale
Valuations start from $3,000 and are ideal for:
- Business sales and mergers
- Raising capital
- Shareholder agreements
- Estate planning and succession
- Growth strategy planning
Move from estimate to certainty. We’ll help you understand your current position — and show you how to increase it.
👉 [Book a Free Consultation with a CFO On-Call Expert]
Frequently Asked Questions
What is the formula for valuing a business?
The most common formula is:
Business Value = Profit (or EBITDA) × Industry Multiple
This varies depending on your industry, risks involved, and value drivers like future profits, assets, and customer base.
What are the 3 main ways to value a company?
- Asset-based valuation – Focuses on the book value of your tangible and intangible assets minus liabilities
- Market-based approach – Compares your business to similar businesses that have sold recently
- Income-based approach – Focuses on expected ROI and future cash flows
How to do a valuation of a small business?
Use your net profit or EBITDA and apply a multiplier (e.g. 2.5x to 3.5x).
You’ll also want to review your business assets, customer base, and financial statements to refine your valuation.
How does Shark Tank calculate valuation?
Entrepreneurs pitch a valuation based on how much they’re asking for and the equity offered.
Example: Asking $200,000 for 10% = $2 million valuation.
The sharks then assess that based on sales, future profits, and current market value.
How can I calculate my business valuation?
Start by identifying your profit, then apply a multiple.
Also factor in intangible assets, intellectual property, business premises, and customer contracts.
This is a good estimate, but should be validated with professional advice.
How to calculate the true value of a business?
How to calculate business valuation involves assessing your income, tangible and intangible assets, liabilities, future cash flows, and market conditions. A discounted cash flow model or net asset value calculation can provide a more accurate figure.
How many times profit is a business worth?
Typically between 2.5 and 3.5 times net profit for SMEs.
However, it can vary depending on industry, business history, customer concentration, and growth potential.
How to calculate the present value of a business?
Present value is calculated by estimating future cash flows and discounting them back using a chosen rate (like cost of capital).
This is known as the discounted cash flow (DCF) method, which is ideal for businesses with strong projected earnings.
For a more detailed overview, see the Australian Government’s guide to valuing a business.
