At some point, every founder confronts the same question: what is my equity pathway, and when is the right moment to act on it? Each option has different implications for control, value, timing, and cultural alignment.
Retain ownership indefinitely and draw dividends.
Sell equity to emerging leaders, often at a discount to external valuation.
Three common pathways:
How to judge the right time to sell, understand what your business is worth, and plan a succession that lasts.
Sale value increases with stability and predictability. Smaller firms must demonstrate strong profitability to attract buyers — often around 20% net profit. As revenue grows, buyers may accept slightly lower margins, but performance consistency remains critical.
| Method | In plain English | Best used when | Watch-outs |
|---|---|---|---|
| Discounted Cash Flow (DCF) |
Forecast future cashflows and discount them to today. |
Cashflows are predictable. |
Highly sensitive to assumptions. |
| Market Multiples | Compare to similar companies. |
Good comparable data exists. |
Quality of comparisons matters. |
| Earnings Capitalisation |
Apply a multiple to maintainable earnings. |
Earnings are stable (SMEs). |
Not suited to volatile earnings. |
Recent Australian professional services SME sales show multiples ranging from 3× to 8× EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation), depending on scale, stability, and strategic fit.
