A business appraisal blends revenue or EBITDA multiples with a discounted cash flow view, then adjusts for size and how easily the stake could actually be sold. For a startup or scale-up, what moves that number most is not the method. It is whether the numbers underneath it, the cap table, the close, the model, hold up to a second read.
The self-service estimate versus the certified appraisal
There are two different things people mean by “business appraisal.” A quick, self-service estimate applies a rule of thumb multiple to revenue or profit and gives you a range in minutes. It is useful for a sanity check, and useless for anything binding. A certified appraisal, done by a qualified valuer, is the defensible version banks, investors, the ATO or a court will actually rely on, for raising debt, a formal sale process, a shareholder buyout or a tax event.
What the method gets you, and what it does not
For a pre-profit SaaS business, a revenue multiple is usually the starting point, because there is no earnings line to anchor a multiple on yet. Once a business is genuinely profitable, an EBITDA multiple takes over, benchmarked against comparable transactions. A discounted cash flow model, projected cash flows discounted back to today, is the most rigorous method and the most sensitive to its own assumptions, which is exactly what an investor or buyer pressure-tests during diligence.
None of the three methods is the whole answer on its own. A formal appraisal typically blends more than one, then applies a discount for the company’s size and how illiquid the stake actually is; a minority stake in a private company is worth less per dollar of the same revenue than a controlling stake in a listed one, because there is no ready market to sell it into.
What actually moves the number, at the stage I work in
At the stage most of my search work sits, a first finance hire through a first CFO, the method matters less than what sits underneath it. An investor or buyer values what they can trust. A clean, auditable close, a cap table everyone agrees on, and a financial model built on assumptions that survive questioning are the difference between a business that gets the multiple it thinks it deserves and one that gets discounted for the diligence risk sitting under the numbers.[1]
I go through what a diligence process actually tests once a valuation is on the table.
If a raise or sale process is the trigger for the hire itself, I set out when that actually means a CFO.
Common questions
What is the difference between a quick valuation estimate and a certified appraisal?
A quick estimate applies a rule-of-thumb multiple to revenue or profit and gives you a ballpark in minutes, which is a fine sanity check but not something a bank, investor or court would ever rely on; for that you need a certified appraisal from a qualified valuer, the version that actually holds up for a raise, a sale, a shareholder buyout or a tax or legal matter.
How is a startup valued if it is not yet profitable?
Most pre-profit startups are valued on a revenue multiple, ARR times a market-comparable multiple, because there is no earnings line to anchor an EBITDA multiple on yet. As the business becomes consistently profitable, EBITDA multiples and discounted cash flow methods take over.
What actually drives up a business's valuation?
The method sets the frame, but trust moves the number inside it. A clean, auditable close, a cap table everyone agrees on including options, and a financial model built on assumptions that hold up under questioning are what an investor or buyer is actually pricing, on top of the raw revenue or profit figure.
Who should own getting a business appraisal-ready?
At the stage most Australian scale-ups are at, that is the first finance hire's job: the model, the close and the cap table have to be clean before an appraisal or a diligence process starts, not scrambled together once one is requested.
References
- From the businesses I see going through a raise or sale process: what moves the multiple a buyer or investor is willing to pay is trust in the numbers underneath it, not the valuation method chosen.
These guides set out how we see it, drawn from the searches we run and the finance leaders we place. They are general information about the market, not financial, accounting or legal advice, and they are no substitute for advice on your own circumstances.