The honest answer up front
Yes, you can — and it is worth doing. Most valuation firms answer this question with a reflexive no, which is self-serving and, more to the point, wrong. The core method professional valuers apply to most trading businesses — normalise the earnings, judge what is maintainable, capitalise at a multiple that reflects risk — is not secret knowledge. A careful owner with three years of financial statements and an honest disposition can work through it in an afternoon and land within a bracket that is genuinely useful. The limit is not the arithmetic. It is what the number can be used for. A self-assessed value works while the only person relying on it is you. The moment a third party needs to rely on it — the ATO reviewing a CGT position, a buyer pricing a deal, a bank, a former partner's lawyer — it fails, and it fails on structural grounds that no amount of careful arithmetic can cure. This article teaches the method properly, because the DIY exercise has real value, and then draws that line honestly. One scope note before we start: this is about doing the work yourself, with your own financials and your own judgement — not typing three numbers into a free web tool. That is a different question, covered separately at /insights/business-valuation-calculator-vs-formal-valuation.
Step one: normalise your earnings
Start with your profit and loss statements for the last three years. The profit figure in them was prepared for tax, not for value, and the first task is to restate it to what the business would earn in the hands of a hypothetical arm's-length owner. This is the normalisation (or add-back) exercise, and it is where most of the value swing hides. Work through each year and adjust for:
- ·Owner remuneration — restate what you pay yourself to the market salary of the role you actually perform. This cuts both ways: an owner on $40,000 for a $180,000 general-manager role has overstated profit; an owner drawing $400,000 for the same role has understated it
- ·Related-party arrangements — rent paid to your own family trust, management fees to a connected entity, family members on the payroll: restate each to arm's-length terms
- ·One-off items — grants, insurance recoveries, a once-off contract, legal settlements, abnormal write-offs. Maintainable earnings excludes anything that will not recur
- ·Personal expenses run through the business — vehicles, travel, subscriptions that would not exist under an arm's-length owner
- ·Discontinued activities — strip out the earnings of anything the business no longer does
Steps two and three: settle maintainable earnings, then apply a multiple range
With three normalised years in front of you, judge the maintainable earnings figure — the level of earnings the business can sustain looking forward. This is a judgement, not a formula. A blind three-year average is wrong if the business has grown steadily; the best year is wrong if it was a spike. Ask what current trading, the pipeline and the customer base actually support, and be honest about direction. Then apply a multiple — and apply it as a range, never a point. Established private businesses in Australia mostly transact at low-to-mid single-digit multiples of normalised earnings, but the spread within any industry is wide, and where your business sits in it is driven by risk: customer concentration, dependence on you personally, lease security, contract terms, and whether revenue recurs or must be re-won every year. Indicative industry ranges are collected at /insights/ebitda-multiples-by-industry-australia, and how capitalisation of maintainable earnings sits alongside the other accepted methodologies is explained at /insights/business-valuation-methods-explained. Two technical corrections matter even at DIY level: the multiple gives you enterprise value, so deduct debt and add back any surplus assets (cash beyond working-capital needs, an investment portfolio parked in the entity) to reach the value of your equity — blurring the two can shift the answer by the entire balance of the entity's borrowings.
Steps four and five: sanity-check against assets, then stress-test
Step four is the asset cross-check. Total the market value of the tangible assets, deduct the liabilities, and compare the result with your earnings-based figure. If the earnings approach produced less than net tangible assets, the asset value may set the floor — a business can be worth more dead than alive. If the earnings approach produced dramatically more, the gap is goodwill, and you should interrogate whether it is believable: would the earnings genuinely survive your departure, or do the clients follow you personally? Goodwill that walks out the door with the owner is not transferable value. Step five is the stress test. Rerun the numbers on a pessimistic case: your largest customer leaves, your salary is corrected to full market rate, the multiple sits at the bottom of the range. Then run the optimistic case. The distance between the two is information — a narrow band means your value is robust to assumption changes; a wide band means the value depends heavily on judgements a sceptical outsider would probe. What you now hold is what professionals hold at the equivalent stage: not a number, but a range, with an honest view of where in the range the evidence points. That is a genuinely useful piece of work — for you.
Where DIY fails: the three tests a self-assessed value cannot pass
Now the honest line. When a valuation is reviewed — and the ATO's published market valuation for tax purposes guidance is explicit about this — the reviewer examines the process before the number: who valued it, on what evidence, using what methodology. A self-assessed value fails that examination at three separate points, and none of them is about whether your arithmetic was right.
- ·Independence — you valued your own asset. The legal definition of market value, running back to Spencer v Commonwealth (1907), turns on a hypothetical willing-but-not-anxious buyer and seller dealing at arm's length. An owner is, by definition, an interested party on one side of that hypothetical. This is not an accusation of dishonesty; it is a structural conflict that scrupulous honesty cannot cure, and it is the first thing a reviewer notes
- ·Evidence — no documented comparable support. You applied 3.5 times because it felt right for your industry; a reviewer asks which comparable transactions support it, where the add-back substantiation is, and whether another valuer could replicate the conclusion from the file. For a DIY value there is no file — a spreadsheet with unexplained inputs is not a working paper
- ·Methodology consistency — was the methodology appropriate for this entity and this purpose, and was it selected before the answer was known? A professional file documents why the method was chosen. A self-assessed value cannot demonstrate that the method was not chosen because of the number it produced — and at review, it is read that way even when it was not
What DIY is genuinely good for
None of that makes the exercise a waste of time. Used for the right purposes, a disciplined DIY valuation is one of the more valuable pieces of analysis an owner can do:
- ·Tracking value over time — run the same five steps, the same way, once a year. The absolute level carries DIY imprecision, but the trend is real information: you can watch what a new contract, a reduced customer concentration or a better margin actually does to value
- ·Pre-sale readiness — run the method two or three years before a planned exit and the weak inputs identify themselves: the multiple-dragging risk factors, the personal goodwill, the add-backs with no paperwork behind them. Those are exactly what a buyer's accountant will attack, and they are fixable while there is still time
- ·Sizing the decision to commission — a DIY range tells you whether a formal valuation is worth paying for. If the range shows the stakes of a CGT event are modest, or that you are nowhere near a threshold that matters, that shapes your accountant's advice about how much substantiation the position needs
- ·Early conversations — a succession discussion, a first conversation between partners about a future exit: settings where nothing yet turns on the precise figure and a shared, reasoned bracket is all that is required
The self-assessment trap: using your own number for a CGT event
Here is where the DIY line gets crossed most often, and most expensively. Australia's tax system is self-assessment: nothing stops you lodging a return that relies on your own DIY value where the law requires market value — a transfer of shares to a family trust where market value substitution applies under s 116-30 ITAA 1997, a small business CGT concession claim under Div 152 where the $6m maximum net asset value test is in play, a restructure rollover. At lodgement, nothing happens. That is the trap. The position is not tested when it is made; it is tested at review, often years later, when the contemporaneous evidence needed to support the historical value is hardest to reconstruct. If the value cannot be supported at that point, the consequences run in sequence: an amended assessment, interest on the shortfall, and penalties that scale with the degree of care the original position demonstrates — and a self-assessed value with no working file behind it struggles to demonstrate reasonable care, whatever the underlying arithmetic was. Repairing the position then requires a retrospective valuation, which is slower and more exacting work than a current one, purchased under time pressure with the ATO already asking questions. What the review process actually examines, step by step, is set out at /insights/how-the-ato-reviews-business-valuations. To be clear about our lane: Prismi prepares independent valuations, not tax advice — whether a particular event requires a market value and what the penalty exposure looks like in your circumstances are questions for your accountant. But the pattern we see is consistent: the owners in the worst position are not the ones who did no valuation, they are the ones who did their own and treated it as settled.
Where to draw the line — and the cheap way over it
The working rule is simple: DIY while the number is only for you, formalise the moment a third party will rely on it. Crossing that line does not require the $5,000–$15,000+ that full valuation reports typically run at traditional Australian firms. A fixed-fee Essential report — from $1,495 + GST, single methodology, senior-reviewer signed under an independence statement, with the working file retained for ten years — exists precisely for this step: taking the position you have already roughed out and turning it into one that survives the three tests above.
- ·DIY valuation — $0, your own time, for tracking, planning and internal decisions only
- ·Essential fixed-fee report — from $1,495 + GST, single methodology, signed and evidence-filed, for straightforward CGT events and other matters where a third party relies on the figure
- ·Comprehensive report or above — from $3,995 + GST, dual or triple methodology, for contested matters, family law or positions carrying realistic ATO-dispute risk
- ·Traditional boutique or full-service firm report — typically $5,000–$15,000+, for higher-stakes or bespoke engagements
The honest trade-off, and where to go next
Essential is a single-methodology report with a deliberately fixed scope, and it is not suited to contested matters, family law, or positions carrying realistic ATO-dispute risk — those need the cross-checked range of a Comprehensive report or above, and stepping up at engagement is far cheaper than commissioning a second valuation after a thin one is challenged. Your DIY work is not wasted either way: arriving with a normalisation schedule, documented add-backs and three years of clean financials makes the engagement faster and the conversation sharper. The full fixed scope is published at /services/business-valuation-under-2000. Do the DIY valuation — genuinely, it will teach you more about your business than most reports will. Just be clear-eyed about which question it answers: what the business is worth to you is a spreadsheet exercise; what it is worth to the willing-but-not-anxious buyer, in a form a reviewer can examine, is a different product.