Where businesses like yours are bought and sold often enough to leave a trail, those prices are the evidence a buyer, a court or the ATO finds hardest to argue with.
The market approach values a Brisbane business by reference to prices paid for similar businesses, or to the multiples at which comparable listed companies trade. For small and mid-sized private businesses, actual private sales filtered by industry, date, performance and size normally outweigh listed company evidence; this is the guideline transaction method.
Multiples drawn from actual sales of private businesses of a similar type and size. For a Fortitude Valley cafe or a North Lakes childcare centre this is normally the best evidence there is, as long as the sales are filtered properly by industry, timing, trading results and the features that matter operationally, rather than lifted from a broad database and averaged.
Multiples at which ASX-listed companies in the same or a neighbouring sector trade, adjusted substantially for size, liquidity and growth. A listed childcare operator or hospitality group is far larger, spread across many sites and can be sold on any trading day, so its multiple acts as a ceiling and a test of reasonableness for a private business, not as direct evidence.
Comparables are filtered in a set sequence. Industry is the first cut, followed by when each sale happened and what the market was doing at the time, then trading results such as growth and margins, and finally the operational features: size, type of customer, location and how far the business depends on its owner. A handful of sales that genuinely resemble the subject beat a long list that only shares an industry code, and the report explains why the point chosen within the range suits this business.
For a Fortitude Valley cafe, that means recent sales of owner-run venues with similar turnover in the inner north, not a national average, and it means reading the lease behind every comparable. Many cafe premises are held under a lease covered by the Retail Shop Leases Act 1994 (Qld), and the term remaining and any options decide how much of the goodwill a buyer can actually keep, so a venue with nine years of tenure and one with a year to run are not comparable even if their takings match. For a North Lakes childcare centre the set is cut down to long day care services with similar approved places and occupancy, and the valuer checks what each one is approved to operate against the national registers kept by ACECQA, with the Queensland Department of Education acting as the state's regulatory authority.
A rule of thumb can test a result but cannot produce one. Shorthand such as a multiple of weekly takings or a set price per licensed childcare place ignores profit and risk, which are exactly what separate two businesses in the same trade, so it would put the same price on a thriving venue and a failing one. The valuer may record the rule of thumb and explain why the evidence lands above or below it, but the conclusion is built on the comparables.
Sectors where enough businesses change hands for the prices to be studied: cafes, restaurants and bars from Fortitude Valley and West End to South Bank, childcare centres in Moreton Bay, Springfield and the other growth areas, community pharmacies, rent rolls, gyms, allied health clinics and online retailers.
The income approach is still run for each of these, normally as the check, and the adjusted net asset figure is still worked out as the floor. The report sets out why the sale evidence earned the greater weight for this business and this purpose.