Small Business Valuation Formula

Small business valuation formulas are used by business valuers to benchmark businesses against their peer groups.

Some of the most commonly used small business valuation formula terms to describe the business’s profits and the price the business sells for are:

  • EBITDA– earnings before interest tax depreciation and amortisation
  • EBIT– earnings before interest and tax
  • NPAT– nett profit after tax
  • PEBITDA– proprietors earnings before interest tax depreciation and amortisation
  • ROI– return on funds invested
  • ROFI -also return on funds invested.

Small business valuation formulas are all about the relationship between the profit a business can maintain and the resulting value that profit gives the business in the marketplace.

Knowing the appropriate small business valuation formula to apply to each particular business is critical, as the use of the wrong small business valuation formula can result in an inaccurate valuation of the business.

Selling a small business or a medium-sized business with GMO Business Brokers

As always, it is highly recommended that you seek the assistance of a registered professional when determining the value of a business.

If you are looking into selling a small business or a medium sized business in Perth or elsewhere in WA, contact us to obtain peace of mind prior to purchasing. There is no harm in thorough due diligence.

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Whether you dream of buying a business, want to sell your Perth or WA business, or want to know the value of your company – GMO’s business brokers and valuers are here to assist you. We have won the City of Perth Award for Business Excellence and our Managing Director has been elected as a fellow of the Australian Institute of Business Brokers. Whether you are a buyer or a seller, GMO can introduce you to the right person.

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