Times-Revenue Method for Business Valuation in Australia (2025 Guide)

Determining the value of a business is part art, part science—especially for Australia’s small and medium-sized enterprises (SMEs). In 2025, the Times-Revenue Method is seeing renewed interest as entrepreneurs, accountants, and investors seek quick, market-aligned valuations. But how does this method work, and when does it make sense to use it?

Understanding the Times-Revenue Method

The Times-Revenue Method values a business by multiplying its gross revenue by a sector-specific multiple. This approach is popular for service-based businesses, technology startups, and industries with recurring revenue streams. The method is simple: if a business earns $2 million in annual revenue, and the industry multiple is 1.5, the business is valued at $3 million.

• Simplicity: No need for detailed profit and loss analysis.
• Speed: Useful for initial negotiations or ballpark estimates.
• Market Alignment: Relies on real deal multiples, reflecting current demand.

However, this method does not account for a business’s unique cost structure, profitability, or growth potential. That’s why it’s often used alongside more detailed valuation techniques.

2025 Updates: Multiples, Sectors, and ATO Guidance

In 2025, the Australian business sale market is dynamic. Multiples vary widely by industry, reflecting post-pandemic economic shifts and digital transformation. Here’s what’s new:

• Professional Services: Accounting, legal, and consulting firms typically fetch multiples of 1.1 to 1.7x gross revenue, according to recent Australian deal data.
• Tech Startups: SaaS businesses with recurring revenue may see multiples as high as 3x, especially if churn is low and customer contracts are locked in.
• Retail & Hospitality: Multiples are softer, often 0.4 to 0.8x, as consumer spending remains volatile.

The Australian Tax Office (ATO) continues to reference industry benchmarks in its 2025 guidance, emphasising that revenue multiples must be justified with comparable sales or published data. This is critical for compliance—especially for businesses involved in succession planning or capital gains tax (CGT) events.

Real-World Example: Valuing a Digital Agency

Let’s say a Sydney-based digital marketing agency reports $1.5 million in annual revenue. Industry reports for 2025 show similar agencies selling for 1.2x to 1.5x revenue. If the agency has long-term contracts and solid client retention, a buyer might be willing to pay the upper end of the range:

• Annual revenue: $1,500,000
• Industry multiple: 1.5x (reflecting recurring contracts)
• Estimated value: $2,250,000

However, if most of the agency’s work is project-based or client churn is high, the multiple may drop to 1.1x or lower. This underscores the importance of understanding not just the revenue figure, but also the underlying business model and market appetite in 2025.

When to Use (and Not Use) the Times-Revenue Method

The Times-Revenue Method is best suited for businesses with predictable, recurring revenue and industry-standard margins. It’s particularly useful for:

• Early-stage valuation discussions
• Service businesses with minimal physical assets
• Benchmarking against recent comparable sales

However, it’s not recommended for asset-heavy companies, businesses with irregular income, or where profitability is highly variable. In these cases, discounted cash flow (DCF) or earnings-based methods will give a more accurate picture.

Key Takeaways for Australian Business Owners

• The Times-Revenue Method offers a quick, market-aligned way to value many Australian businesses in 2025.
• Multiples are sector-specific and must be justified with real data.
• This method is most effective for businesses with recurring revenue streams and stable client bases.
• Always pair revenue multiples with deeper analysis before finalising any sale or succession plan.