Asset-Based Approach: How Australians Value Businesses in 2025

When it comes to valuing a business in Australia, one size rarely fits all. The asset-based approach—a method that focuses on what a company owns rather than just its earnings—is gaining momentum, especially as economic conditions and regulatory frameworks shift in 2025. Whether you’re a small business owner, a prospective investor, or a corporate strategist, understanding this approach could prove critical in an increasingly asset-sensitive market.

What is the Asset-Based Approach?

The asset-based approach values a business by calculating the net value of its assets—essentially, total assets minus total liabilities. Unlike income-based methods, which focus on projected cash flows, this technique zeroes in on the tangible and intangible assets a company holds. It’s particularly popular for asset-rich businesses or those facing restructuring or liquidation.

• Tangible assets: Property, plant, equipment, inventory

• Intangible assets: Patents, trademarks, goodwill

• Financial assets: Cash, investments, accounts receivable

In 2025, the ATO and ASIC have both tightened scrutiny on asset reporting, making accuracy in valuation more crucial than ever. For example, recent changes in depreciation rules for SMEs (Small and Medium Enterprises) mean that asset values on the balance sheet must reflect updated guidelines, directly impacting valuations.

Why Is the Asset-Based Approach Trending in 2025?

Several factors have propelled the asset-based approach into the spotlight this year:

• Economic volatility: With market swings and interest rate changes, relying solely on future earnings projections can be risky. Asset values provide a more stable baseline.

• Regulatory updates: In 2025, Australian regulators have reinforced asset disclosure requirements, particularly for businesses in property, mining, and manufacturing sectors. This has made the asset-based approach not only relevant but sometimes required for compliance.

• Restructuring and insolvency: With the lingering effects of global supply chain disruptions, more businesses are being assessed for restructuring or winding up. Asset-based valuations are essential in these scenarios.

Take, for example, a manufacturing firm in Victoria facing insolvency. Its future earnings are uncertain, but its fleet of machinery, real estate holdings, and raw material inventory represent tangible value. In these cases, creditors and administrators lean on asset-based valuations to determine payouts and restructuring plans.

When Should You Use an Asset-Based Approach?

While this method isn’t suitable for every scenario, it shines in specific contexts:

• Asset-rich businesses: Property companies, manufacturers, mining firms, and agribusinesses often have significant physical assets that underpin their value.

• Business sales or mergers: When a company is changing hands, buyers and sellers want clarity on what’s being transferred. An asset-based valuation cuts through the noise.

• Restructuring or liquidation: If a business is winding down, creditors need to know what’s left to claim. Asset-based valuations provide transparency.

• Tax and compliance: The ATO’s updated 2025 guidance now requires more granular asset detail in certain sectors, making this approach a compliance tool as well as a valuation method.

However, for high-growth tech startups or service-based businesses with minimal physical assets, an income or market-based approach may yield a truer picture of value.

How to Implement the Asset-Based Approach Effectively

Applying the asset-based approach requires more than just tallying up numbers from the balance sheet. Here’s what to keep in mind in 2025:

• Update asset values: Ensure that all assets are revalued to reflect current market conditions, especially with new depreciation schedules.

• Identify hidden liabilities: Off-balance-sheet obligations, such as pending legal claims or environmental liabilities, must be included.

• Consider intangible assets: Intellectual property, brand value, and goodwill can make a significant difference, particularly in sectors like agri-food and advanced manufacturing.

• Document everything: With stricter ATO and ASIC oversight, thorough documentation and third-party appraisals are essential for compliance and credibility.

For example, a Brisbane-based property developer recently used the asset-based approach to secure additional finance. By commissioning an independent valuation of its land and partially completed projects, it demonstrated a strong asset base, resulting in more favourable loan terms from its lender.

The Bottom Line

The asset-based approach isn’t just a fallback for distressed companies—it’s a robust tool for a range of financial decisions in 2025’s dynamic Australian market. From regulatory compliance to informed investment, knowing when and how to apply this method could give you a decisive edge.