Set the asking price with evidence before the buyer's advisers test it.

A vendor due diligence valuation is a sell-side valuation prepared before a business goes to market, establishing maintainable EBITDA and testing the addbacks a buyer's advisers will scrutinise. Prismi prepares vendor due diligence valuations with the evidence trail built for the data room — normalisations documented, the working capital peg modelled — so the vendor sets the asking price with evidence rather than defending it after the fact.

When a sale-readiness valuation makes sense

A sale-readiness valuation is commissioned by the vendor before a business goes to market, to run the same tests a buyer's due diligence will run — before the buyer runs them first. The buyer will scrutinise the numbers regardless; the only question is whether the vendor has already done the same work. Every unsupported number in the information memorandum — an addback without an invoice, a normalisation without market evidence, a working capital position that has never been modelled — becomes a price reduction during diligence. Commissioned ideally six to twelve months before going to market, the report converts the asking price from a private hope into a documented position. The report and its evidence file go into the data room, where they anchor the negotiation rather than waiting to be dismantled by the buyer's accountants.

Maintainable EBITDA, not reported earnings

Buyers price maintainable earnings, not statutory profit. The gap between the two is where deals are won and lost. Normalisations that typically need to be worked through include owner remuneration restated to the market cost of replacement, related-party rent restated to market, genuine one-off costs removed, discontinued activities carved out with a separable profit history, and run-rate adjustments for material contracts recently won or lost. The discipline we apply is the buyer test: each normalisation must survive being reversed by a sceptical analyst working for the other side. Where an adjustment cannot be evidenced, it is better excluded before the business goes to market than defended halfway through diligence.

Addback hygiene — what buyers accept and what gets rejected

Buyers generally accept addbacks that are documented and genuinely non-recurring: owner salary adjusted to a market replacement cost supported by payroll records, one-off legal or restructure costs with invoices, expenses of a clearly discontinued activity, and non-recurring relocation or fit-out costs. Buyers routinely reject the rest: "one-off" costs that appear in each of the last three years, personal expenses with no invoices or clean separation, related-party charges adjusted without market evidence, unimplemented cost savings and synergies the buyer would have to create themselves, and normalised repairs or marketing the business actually needs to sustain its earnings. Our working rule: an addback the vendor cannot evidence with a document or two is a price-chip waiting to happen. The report tests every addback against that standard and grades what survives.

Working capital pegs quietly move the price

A working capital peg is the "normal" level of working capital a vendor is contractually required to deliver at completion, usually set from a trailing average of monthly balances. Most private sale terms assume a cash-free, debt-free business delivered against that peg — at completion the actual working capital is compared against it, and any shortfall adjusts the price dollar for dollar. Vendors who have not modelled their own peg end up accepting one set by the buyer's advisers, often at a seasonal high point. The same mechanism catches debt-like items: employee leave entitlements, unpaid superannuation, tax arrears and customer deposits are frequently reclassified as debt and deducted. Our analysis models the peg from monthly balances, flags the seasonal pattern, and identifies the debt-like items early — so the vendor knows the realistic net proceeds range, not just the headline multiple.

The evidence trail that goes into the data room

The evidence trail that goes into the data room for a vendor due diligence valuation covers the normalised EBITDA build, the underlying financials, and the documents that support every addback and adjustment the buyer's advisers will test.

• ·Normalised EBITDA schedule with the evidence for every adjustment attached
• ·3–5 years of financial statements plus current year-to-date management accounts
• ·Customer concentration analysis with contract terms and renewal dates
• ·Key contract summary — customers, suppliers, distribution — with change-of-control clauses flagged
• ·Premises lease terms: remaining term, options, and market rent evidence where rent is normalised
• ·Addback evidence file: invoices, agreements and payroll records supporting each addback
• ·Monthly working capital analysis with the proposed peg and reasoning
• ·Asset register split between operating assets and surplus assets excluded from the deal
• ·Organisation chart with key-person dependencies identified and mitigations noted

Where this differs from an APES 225 valuation engagement

A vendor due diligence valuation is not automatically a full APES 225 valuation engagement — the applicable scope depends on intended use, and we confirm that at engagement. APES 225 governs valuation services provided by members of the professional accounting bodies and distinguishes a full valuation engagement from limited-scope and calculation engagements; a sale-readiness report prepared purely for negotiation is decision support, so it puts more weight on earnings quality, addback defensibility and completion mechanics than a compliance-purpose report would. The basis of value is still Market Value per IVS 104, and independence, fixed fees and senior review apply in full. The distinction matters when the sale also triggers tax steps — a pre-sale restructure, a small business CGT concession claim under Division 152, or an earn-out — because the same numbers will be re-used for tax purposes and, consistent with the ATO's market valuation guidance on evidence and process, must then be built to full valuation-engagement rigour. We confirm the intended use at engagement and scope the report accordingly. We prepare the valuation only — we are not a registered tax agent, and your tax adviser confirms how the concessions and structure apply.

Tier recommendation

Most sale-readiness engagements sit at the Comprehensive tier (from $3,995 + GST, 15–25 business days), which covers the maintainable EBITDA build, addback testing and working capital analysis for a typical private business sale. Businesses with customer concentration, contested addbacks or a likely contest over the peg warrant the Defensible Valuation File (from $8,995 + GST, 25–35 business days) — the evidence file is built to be handed directly to the buyer's advisers. Adviser-led processes weighing sale structure, earn-out scenarios or a pre-sale restructure are suited to the Valuation Range & Scenario Review (from $12,995 + GST, 30–45 business days). An Essential engagement (from $1,495 + GST, 10–14 business days) suits an owner who wants an early, realistic read on value before committing to a sale process. Additional entities are $750 each, historical valuation dates add $495 per date, and rush turnaround is available at +30%, subject to capacity.