You start from sustainable earnings, not last year’s profit — normalised for owner’s wages, one-offs and anything that leaves with you — then apply a multiple that reflects the real risk and transferability of those earnings. Two businesses with the same profit can be worth very different amounts if one depends entirely on the owner and the other runs without them.
What it depends on
Where judgement stays human: Choosing the right earnings base and a defensible multiple is judgement, not a calculator — and it’s what a buyer’s adviser will pressure-test line by line.
The number a buyer pays is a view on future maintainable earnings and how certain they are. So the work is mostly in normalising the accounts: adding back a market salary for your own labour, stripping out private or one-off items, and showing earnings a new owner could actually repeat.
The multiple then prices risk. Customer concentration, owner dependence, thin systems and short lease or contract tails all pull it down; recurring revenue and a business that runs without you pull it up. A valuation that ignores transferability flatters the price and fails in due diligence.
Choosing the right earnings base and a defensible multiple is judgement, not a calculator — and it’s what a buyer’s adviser will pressure-test line by line.
Local Knowledge Ventures · general information current as at 1 September 2026. This is general information only, not personal financial, tax or legal advice.