The example
Consider a profitable trading business — an Australian services firm with $4m annual revenue, $800k normalised EBITDA, ten employees, modest tangible assets ($150k net), goodwill driven by a small number of key client relationships, and three owner-shareholders. One owner is transferring their 35% holding to a related family entity for CGT purposes at a current valuation date. What is the market value of the 35% interest?
Methodology 1 — Capitalisation of Maintainable Earnings
Maintainable EBITDA: $800k. Selected multiple based on private SME services-firm comparables: 4.0x. Enterprise value: $3.2m. Net debt and surplus assets adjustment: nil. Equity value (100%): $3.2m. Pro-rata share for 35% holding: $1.12m. Minority discount for non-controlling interest: 20%. Conclusion via CME: $896k for the 35% interest.
Methodology 2 — EBITDA multiple from comparable transactions
Comparable Australian private services-firm transactions in the same revenue band: median EBITDA multiple 4.4x, range 3.6x – 5.2x. Selected multiple: 4.3x reflecting the entity's mid-sized position and stable revenue base. Enterprise value: $3.44m. Same pro-rata and minority discount logic. Conclusion via market multiple: $963k for the 35% interest.
Methodology 3 — Net Asset Value (cross-check)
Tangible net assets: $150k. Identified intangibles (client relationships): not separately valued under the entity's accounting. NAV provides a floor but does not support the trading value of the entity. Confirms that the earnings-based methodologies are appropriate.
The supportable range and the position within it
The supportable range across the two earnings-based methodologies is approximately $896k – $963k for the 35% interest. The most supportable position depends on weighting. Where the comparable transaction evidence is current and the comparables are genuinely comparable, the market multiple methodology may be weighted more heavily, pointing to a position toward the higher end. Where the comparables are limited or the entity is somewhat distinctive, CME may be weighted more heavily, pointing toward the lower end. Sensitivity on the minority discount magnitude (could reasonably be 15–25%) widens the band further.
Why this matters
The 35% interest could defensibly be valued anywhere from approximately $840k (CME with higher minority discount) to $1.02m (market multiple with lower minority discount). Both ends are supportable. The most supportable position is whichever the methodology weighting and evidence weighting most strongly defend. In this engagement, with the comparables evidence reasonably strong, the conclusion might land at $940k — within the range, reasoned, supportable. A different valuer with a different methodology weighting could defensibly conclude $895k or $980k. All three positions could survive a review.
What this is not
This is not a menu of values for the client to choose from. The valuer makes a methodology and weighting decision based on the evidence — not the client. The client does not nominate the multiple or the discount. The fact that the range exists is a reflection of professional methodology, not negotiation. Where the family entity wanted the highest possible value, our framework would still identify $940k (or wherever the methodology lands) as the most supportable position. We would not move to $1.02m simply because it is at the top of the defensible range.
How this informs the engagement
For matters where the supportable range matters — restructures, shareholder exits, related-party transfers with disputed positions — the Valuation Range & Scenario Review engagement produces a structured analysis of the range with the most supportable position concluded. The adviser sees the range, the weighting decisions, and the reasoning. The conclusion remains a single most-supportable position. The range exists in the analysis to inform the adviser, not to offer a choice to the client.