Business valuation vs business appraisal: what's the difference?

An appraisal and a valuation both put a price on a business, but they answer different questions. An appraisal is a specialist broker’s view of what your business would likely sell for in today’s market. A valuation is a detailed, written report from a qualified valuer, built to be relied on by banks, the Tax Office, lawyers and courts. This guide explains how each one works, what they cost, how long they take, and how to tell which one you need.

In short

A business appraisal estimates what your business would sell for now, based on its normalised profit and what buyers are paying for similar businesses.
A business valuation is a formal report by a qualified valuer, with the method, evidence and assumptions set out in full.
Choose an appraisal when the figure is just for you, for example when you are planning a sale.
Choose a valuation when someone else will rely on the figure, such as a bank, the ATO, a state revenue office, a business partner or a court.
At Benchmark, appraisals start from $2,000 + GST and take a few days. Valuations start from $4,000 + GST and take up to 4 weeks.

In this guide

At a glance
Which one you need
Business appraisals
Business valuations
When a valuation is needed
Knowing your value
FAQs

Appraisal vs valuation at a glance

The two reports overlap, but they differ in depth, in who prepares them and in who can rely on them.

	Business appraisal	Business valuation
What it answers	What would the business likely sell for today?	What is the business worth, supported by evidence that can be tested?
Prepared by	A specialist business broker	A qualified business valuer
How deep it goes	Normalised profit, a market multiple and recent comparable sales	A full review of trading history, costs, the balance sheet and market evidence
Who can rely on it	You, for your own planning	Banks, the ATO, revenue offices, partners, lawyers and courts
Typical uses	Sale planning, setting an asking price, periodic value checks	Tax, duty, finance, partner exits, succession, family law and disputes
What you receive	A price range and the broker’s reasoning	A signed written report with the method, assumptions and limitations
Turnaround at Benchmark	A few days	Within 4 weeks
Fee at Benchmark	From $2,000 + GST	From $4,000 + GST

Which one do you need?

Answer up to three quick questions to see which report fits your situation. It takes less than a minute, and the result explains why.

What do you need a price for?

Pick the closest match.

Will anyone else rely on the figure?

For example a bank, the Tax Office, a buyer, a business partner, a lawyer or a court.

When are you thinking of selling?

A rough idea is fine.

Our recommendation:

What is a business appraisal?

A business appraisal is an estimate of what a business would sell for at a particular point in time. It is prepared by a broker who sells businesses like yours, so it reflects what buyers are actually paying, not just what the numbers say on paper.

Most appraisals start from the business’s normalised profit: the reported EBITDA (earnings before interest, tax, depreciation and amortisation), adjusted for one-off or unusual items a buyer would not expect to carry. The broker then applies a market multiple to that profit to arrive at a price range.

Start with EBITDA and add back items a new owner would not incur, such as one-off legal costs, the owner’s personal expenses or above-market family wages. Then deduct a fair wage for any work the owner does that a buyer would need to replace.

If the business is stable with moderate growth, the broker usually looks at three or four years of results. If it has grown quickly or changed significantly, a shorter period is fairer, and in some cases only the latest year is used.

The multiple reflects the return buyers expect for that type of business, based on recent sales in the same industry and market. Lower risk, stronger systems and less reliance on the owner all support a higher multiple.

Where a business is particularly asset rich, the written-down value of its plant and equipment may be added to the result. Stock is usually added on top of the price, valued at settlement.

Good to know: an appraisal is not a certified report. It is a well-informed guide to market value for your own decisions, so it should not be relied on for tax, finance, legal or court purposes.

What is a business valuation?

A business valuation is a far more thorough process. A qualified valuer analyses the business’s trading history in depth to understand the income it generates, the expenses it incurs and the risks a buyer or investor would take on. The result is a written report that sets out the method, the evidence and the assumptions, so it can be checked and relied on by others.

Every expense has a story, and so does the income. A valuer’s job is to find out what sits behind the numbers before putting a figure on them.

The valuer reviews several years of financial statements and tax returns to see how revenue and profit have moved, and why. Sudden changes are investigated rather than averaged away.

Changes in gross profit margin tell a story. For example, the valuer checks whether prices were discounted to lift sales at the expense of margin, or whether extra advertising grew sales but pushed up costs just as much.

Wages and occupancy costs are compared with industry benchmarks, and the valuer checks that the business meets its legal and best-practice obligations. Extraordinary income or expenses are adjusted out of the profit.

The balance sheet shows how much stock is carried, what employee entitlements are owed, how much working capital the business needs day to day, and whether creditors, the ATO and lenders are being paid on time. All of these can affect value, and they are often overlooked in a simple appraisal.

Finally, the valuer looks at the multiples, rates of return or capitalisation rates being paid in the market, then applies them to the business’s maintainable profit. Good market evidence is hard to find and harder to interpret, which is why experience matters.

Part shares are valued differently. A minority stake is usually worth less than its proportional share of the whole business, because it carries less control and is harder to sell. Valuing a part interest calls for a qualified valuer.

When you need a certified valuation

If anyone other than you will rely on the figure, an appraisal will not be enough. These are the most common situations where a certified valuation is needed.

Situation	Why a valuation is needed
Partner or shareholder exit	Both sides need a figure they can rely on, and either may test it.
Capital gains tax and the ATO	The Tax Office can review the figure, so it needs a documented method and a qualified valuer behind it.
State transfer duty	Duty is assessed on market value, and the revenue office can question a figure that is not properly supported.
Finance or refinancing	Lenders assess the business as security and want an independent report from a qualified valuer.
Succession and estate planning	The figure needs to be fair to everyone involved and hold up if it is questioned later.
SMSF or related-party transfers	Related-party dealings need to reflect market value, supported by an independent valuer.
Family law settlements	Our certified valuations are prepared to the evidentiary standard the matter requires, so no separate court report is needed.
Shareholder or partnership disputes	The figure has to withstand scrutiny from the other side and, if it comes to it, a court.

Why it pays to know your value early

Most owners only think about value when they are ready to sell. Knowing it earlier is more useful. A regular appraisal shows how the business is tracking, highlights what is holding the price back, and gives you time to fix it while it can still lift the result.

A sensible rhythm is an appraisal every year or two, and another 12 to 24 months before you plan to sell. If a tax, finance, legal or family matter comes up in between, that is the time for a certified valuation.

FAQs

Is a business appraisal the same as a business valuation?

No. An appraisal is a broker’s estimate of what the business would sell for in the current market, prepared quickly for your own planning. A valuation is a detailed written report from a qualified valuer that sets out the method, evidence and assumptions, so others can rely on it.

How much does a business appraisal cost?

At Benchmark, a business appraisal starts from $2,000 + GST and is usually ready within a few days. The fee is fixed and quoted up front, and the process is confidential with no obligation to sell.

How much does a business valuation cost?

Benchmark’s certified business valuations start from $4,000 + GST and are usually ready within 4 weeks of receiving your information. The fee depends on the size and complexity of the business and is quoted before any work starts.

Can I use an appraisal for tax, finance or a family law settlement?

No. Those situations need a figure that can be checked and challenged, so they call for a certified valuation from a qualified valuer. An appraisal is designed for your own decisions, such as when and how to sell.

Who can prepare a business valuation?

A business valuation should be prepared by a qualified valuer with recognised valuation training and experience in the relevant industry. That is what gives the report weight with banks, the ATO and the courts.

Is an online appraisal calculator the same as an appraisal?

No. A calculator gives an indicative range based on the figures you enter and typical industry multiples. A broker appraisal looks at your actual financials, adjusts the profit properly and tests the price against recent sales of similar businesses.

How often should I get my business appraised?

Every year or two is a good habit, with another appraisal 12 to 24 months before a planned sale. That gives you time to act on what it shows and improve the price before you go to market.

Related guides

Need a price you can rely on?

Talk to us about a confidential business appraisal or a certified business valuation. No obligation. Or call 1300 366 521.

Find a valuer near you: Brisbane, Sydney, Melbourne, Perth, Adelaide, Gold Coast, Sunshine Coast, Darwin.

This guide is general information, not financial, tax or legal advice. Fees and turnaround times are indicative and confirmed when we quote.