Bizval Indicator Report
for December 2024
We like to think of the Bizval Indicator as a ‘barometer’ of SME valuation multiples providing a perspective of the value of Australian small-to-medium sized businesses.
Unlike listed companies, the sale prices of SME’s are not readily available. The Bizval Indicator helps monitor movements in the drivers of SME values.
The Bizval Indicator is derived from key drivers of SME values and is then reviewed in the context of a basket of general economic indicators.
Bizval Indicator
| NOW | 1 YEAR AGO | MOVEMENT |
|---|---|---|
| 328 | 327 | 0.4% |
Source: Bizval, 31 December 2024.
Bizval Indicator stable in the year to December 2024.
The Bizval Indicator remained relatively stable over the 2024 calendar year, posting a minor increase of 0.4% on a yearly basis.
On a quarterly basis the Bizval Indicator declined by 1.5%. This follows last quarter’s 1.8% retreat, effectively reversing the gains of the March ‘24 quarter.
Actual valuation multiples from our data retracted again this quarter.
Business lending rates advertised by the big four banks remained unchanged.
The most interesting movement in the drivers of the Bizval Indicator was in the volume of businesses listed for sale – which declined by 4.0% over the year. This contraction is the 6th consecutive decline (on a year-on-year basis).
The most significant purposes for which valuations were obtained in the December quarter were ESOP, Family Law and (business) partnership dissolutions.
General Economic Indicators
| INDICATOR | NOW | 1 YEAR AGO | MOVEMENT |
|---|---|---|---|
| All Ordinaries Index AU (1) | 8,421 | 7,830 | 7.55% |
| RBA Cash Rate AU (2) | 4.35% | 4.35% | 0.00% |
| GDP AU (3) | 0.80% | 2.10% | -1.30% |
| Dow Jones Industrial Average USA (4) | 42,544 | 37,690 | 12.88% |
| Inflation Rate AU (5) | 2.80% | 5.40% | -2.60% |
| Unemployment Rate AU (6) | 3.90% | 3.80% | 0.20% |
(1) Source: Australian Stock Exchange, 31 December 2024
(2) Source: Reserve Bank of Australia, 11 December 2024
(3) Source: Australian Bureau of Statistics, 30 September 2024 (seasonally adjusted, yearly)
(4) Source: New York Stock Exchange, 31 December 2024
(5) Source: Australian Bureau of Statistics, 30 September 2024 (headline, yearly)
(6) Source: Australian Bureau of Statistics, 12 December 2024
Gross Domestic Product (GDP)
Australian gross domestic product (GDP) rose 0.3% in the September quarter 2024 and by 0.8% since September 2023 (seasonally adjusted, chain volume measure), according to figures released by the Australian Bureau of Statistics (ABS).
Katherine Keenan, ABS Head of National Accounts, said:
“The Australian economy grew for the twelfth quarter in a row, but has continued to slow since September 2023.”
The strength this quarter was driven by public sector expenditure with Government consumption and public investment both contributing to growth.
GDP per capita fell by 0.3%, falling for the seventh straight quarter.
Unemployment Rate
The seasonally adjusted unemployment rate fell by 0.2 percentage points to 3.9% in November.
David Taylor, ABS Head of Labour Statistics said:
“With employment rising by 36,000 people and the number of unemployed decreasing by 27,000 people, the unemployment rate fell to 3.9 per cent.
In November we saw a higher than usual number of people moving into employment who were unemployed and waiting to start work in October. This contributed to the rise in employment and fall in unemployment.” (Source: ABS)
Drivers of SME Values
The Bizval Indicator is calculated using a proprietary formula. We research, monitor and evaluate the following components to arrive at the result.
ASX Small Cap P/E Ratios
Small Capitalisation companies have greater similarities to private SMEs than large cap stocks. Bizval reviews the mean and median price earnings (P/E) ratios of companies with market capitalization of between $20 million and $200 million. We adjust these figures to align them more closely with private SMEs by reducing the P/E ratios to account for differences in size, key-person dependence and ability to easily buy or sell (liquidity).
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Business Loan Interest Rates
Bizval monitors the advertised interest rates of Australian major banks for business loans. Using an average of these rates we then add a risk margin (commonly added to the base rate by banks when lending to small businesses). We also add a hypothetical margin for the SME proprietor to reflect their return on investment. This interest rate is then converted to a multiple.
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Businesses for Sale
Bizval undertakes a review of the volume of businesses listed for sale across Australia, taking into account any movements in this number.
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Bizval Multiples
We review an average of the multiples used in our business valuations and combine these with multiples from actual business sales (where available).
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In addition to the four drivers of SME values, the Bizval Indicator is evaluated in the context of six national / international General Economic Indicators.
The All Ordinaries Index (Australian Stock Exchange)
The ‘All Ords’ is the oldest index of shares in Australia, dating from 1980. It is derived from the share prices of 500 of the largest companies listed on the Australian Securities Exchange (ASX).
Reserve Bank of Australia Cash Rate
The RBA sets the target ‘cash rate’, which is the market interest rate on overnight funds. It uses this as the instrument for monetary policy, and influences the cash rate through its financial market operations.
Gross Domestic Product (Australia)
GDP is a monetary measure of the market value of all final goods and services produced over a defined period of time.
Dow Jones Industrial Average (USA)
The ‘Dow’ is a US stock market price-weighted index monitoring the share trading performance of 30 large, publicly owned American-based companies.
Inflation Rate (Australia)
The Consumer Price Index (CPI) measures the average change over time in the prices paid by Australian households for a fixed basket of goods and services.
Unemployment Rate (Australia)
The proportion of unemployed persons in the labor force is seasonally adjusted to take account of changes in demand for agricultural labor, students seeking employment after completing education, and so on.
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