When a buyer or their advisers assess a business, the first documents they request are the last three financial years of accounts. For most Australian owner-led businesses, those accounts are prepared once after June 30, reviewed briefly, filed with the ATO, and set aside.
A buyer does not set them aside. They build a picture from them that the seller rarely gets to see: which profit is real, which profit is owner-adjusted, how cash flows through the year, and whether the business has been run for lifestyle or for value. That picture sets the ceiling on the multiple before the first conversation about price.
The financial year is not yet over. June 30 is still weeks away, and the decisions made between now and then, some straightforward and some more considered, shape what a future buyer will read in the accounts that matter most to any eventual sale.
What Normalised Earnings Actually Means
When advisers discuss EBITDA multiples, the EBITDA in question is rarely the number that appears in the accounts. It is normalised EBITDA: the earnings figure after removing or adjusting items that reflect the current owner’s specific circumstances rather than the underlying trading performance of the business.
For owner-led SMEs, the most common adjustments are owner salary and on-costs, where remuneration has been set with tax efficiency in mind rather than at a market rate, personal expenses run through the business, vehicle costs with a personal-use component, one-off or non-recurring costs, and related-party transactions at non-market rates.
Each legitimate adjustment lifts the normalised figure, and therefore the enterprise value at any given multiple. A business reporting $300,000 in profit might normalise to $420,000 with defensible add-backs applied. At a five-times multiple, that is a $600,000 difference in value. Buyers and their due diligence teams will apply their own adjustments either way. The question is whether the seller’s records are clean and well-documented enough to support each one.
The Three Characteristics That Set the Multiple
Buyers use the multiple as a reward for predictability. Businesses that attract the stronger end of their sector’s range tend to show three things consistently in their financial history.
Revenue is consistent and growing. A steady upward pattern across three years carries far more weight than a single standout year preceded by two flat ones. A buyer constructing their investment case needs to believe the next three years will resemble the last three, and the accounts are the primary evidence they use to build that belief.
Cash conversion tracks the profit. Strong EBITDA paired with slow debtor collection, inventory that absorbs cash unpredictably, or a working capital position that tightens year on year signals operational risk. The balance sheet and the cash flow statement tell a story the profit and loss alone does not.
The profit is believable without the owner present. Owner salary add-backs lift normalised EBITDA, but they also confirm to a buyer that the owner’s absence changes the business materially. The multiple contracts as owner dependence rises. A business with a capable management layer, documented operating procedures, and customer relationships held at the business level is simply worth more to a buyer, at the same revenue, than one without these characteristics.
What June Is Still Time to Influence
Several steps remain available before the year closes.
Review discretionary expenses running through the business accounts. Any personal or lifestyle items that are genuinely non-business should be handled cleanly before year end. Consistent, documented treatment makes the eventual normalisation exercise far easier to defend.
Examine the receivables position. Aged debtors beyond sixty days reduce the apparent quality of the cash cycle. A focused collection effort before June 30 strengthens the balance sheet and signals a well-run credit function to any future buyer.
Note any genuine one-off costs in this year’s accounts. A brief management note explaining non-recurring items takes minutes to prepare and removes significant friction during a future due diligence process, when the buyer’s team is looking for patterns and every unexplained variance invites a question.
If you have not yet run a formal business valuation, the period immediately after EOFY, when twelve months of clean financials are available, is the natural moment. An indicative valuation using three methodologies and a clear view of the value drivers and detractors gives you a baseline to work from, whether a sale is planned in two years or in seven. Understanding where the number sits now is what makes it possible to lift it deliberately over the years that follow.
ProfitPulse works with owner-led businesses at exactly this point in the cycle: the EOFY period when the financial picture is taking its final shape and the decisions about value and sale preparation are best made with a clear view of what the numbers already show. If you have been meaning to understand what your business is worth and what it would take to improve that number, the weeks around June 30 are the right time to build that picture. Book a complimentary 45-minute discovery call with ProfitPulse.
Frequently asked questions
What does a buyer look for in EOFY financial statements in Australia?
Buyers typically examine three years of accounts for a consistent earnings pattern, the quality of working capital management, the degree of owner dependence in the revenue base, and how one-off or unusual costs have been treated. The accounts show not just whether the business was profitable, but whether that profit is repeatable and whether it survives a change of ownership.
What are EBITDA add-backs and how do they affect my business value?
Add-backs are legitimate adjustments to reported profit that convert it to normalised EBITDA, the figure on which a multiple is applied. Common add-backs for Australian SMEs include owner salary set above or below market rate, personal expenses run through the business, and genuine one-off costs. Each defensible add-back lifts the normalised figure and therefore the enterprise value at any given multiple, sometimes significantly.
How many years of financial records does a buyer review before purchasing a business?
Most buyers and their advisers in an Australian SME acquisition examine three financial years, with the most recent year carrying the most weight. Where the latest year is materially stronger than prior years, buyers apply additional scrutiny to determine whether the improvement reflects a genuine and sustainable change in the business.
What can I do before June 30 to prepare my business for a future sale?
Three practical steps remain available before year end. Clean up any personal or discretionary expenses running through the business to ensure the accounts reflect trading activity clearly. Chase aged receivables to present a stronger working capital position. Document any non-recurring costs with a brief management note so they are easy to explain during due diligence. An exit readiness review at this point identifies which of these items will carry the most weight.
How does owner dependence reduce the valuation multiple for my business?
Buyers price owner dependence as risk. A business where the owner holds the key customer relationships, primary technical expertise, or most of the operational decision-making is a business whose earnings are exposed if the owner leaves. Buyers compensate for that risk with a lower multiple. The discount between an owner-dependent business and one with a capable management layer can represent two to three times annual profit at the point of sale.
When is the best time to get a business valuation in Australia?
The period immediately after EOFY, when twelve months of clean financials are available, is typically the best time to commission a first valuation. That baseline gives you several years to work on identified gaps before a planned exit. A formal business valuation at this point shows you exactly where value sits, what is holding it down, and what the realistic upside looks like with focused effort.
What is the typical EBITDA multiple for an Australian SME in 2026?
Multiples for Australian owner-led businesses vary considerably by industry, size, and structural quality. Trades and hospitality businesses typically attract two to four times normalised EBITDA. Professional services and technology businesses often achieve four to seven times, sometimes more where recurring revenue is strong. The spread within any sector is large, and structural factors including owner dependence, revenue concentration, and working capital quality typically explain the premium between the top and bottom of the range.
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