How to value a business for sale in South Africa

The three methods that actually get used

Valuation is not one formula producing one number; it is two or three methods triangulated into a range, which is what you then negotiate within. Three approaches do almost all the work in a South African sale.

Earnings multiples are the anchor for most profitable businesses. For a smaller, owner-operated business the metric is Seller’s Discretionary Earnings (SDE) — profit with the owner’s salary, perks and one-off costs added back — multiplied by an industry multiple, commonly in the region of 2 to 4 times. For a larger, management-run business buyers switch to adjusted EBITDA multiplied by a multiple, commonly in the region of 4 to 7 times depending on sector, because the platform can run without the founder.

Discounted cash flow (DCF) projects the business’s future free cash flows and discounts them to a present value. It is most defensible for businesses with stable, predictable, recurring revenue, and least reliable where the forecast is really a hope. Buyers use it to stress-test the multiple, not usually to replace it.

Comparable transactions — what similar businesses actually sold for — sets the market reality around the other two. Asset-based approaches sit underneath as a floor for asset-heavy or loss-making businesses. A credible valuation uses more than one and shows the range they produce.

The mistake that costs sellers the most: online multiples are for listed companies

If you take one thing from this article, take this. The EV/EBITDA multiples published online and quoted by valuation calculators are overwhelmingly drawn from listed companies. Private SMEs trade at a large discount to those figures — across industries the median listed multiple runs at roughly 1.92 times the equivalent SME multiple, and the gap is wider in some sectors than others.

The reason is not unfairness; it is risk and liquidity. A listed share can be sold in seconds and sits in a business with depth of management, audited reporting and diversified customers. A private SME often depends on its owner, has thinner reporting, and cannot be exited quickly. Buyers price that difference. An owner who reads ‘my sector trades at 12× EBITDA’ online and asks for 12× will price the business out of every real conversation. The multiple that matters is the private-market one for a business of your size, in your sector, in South Africa.

Normalising earnings: the number buyers actually pay for

No competent buyer values your business on its reported profit. They value it on normalised earnings — what the business truly earns once owner-specific and one-off items are stripped out. This is where value is genuinely created or lost before a business goes to market.

Normalising means adding back the owner’s above-market salary, private expenses run through the business, and genuinely one-off costs (a legal case, a relocation), while subtracting the cost of anything the buyer will have to start paying for — most commonly a market-rate manager to replace an owner who works in the business unpaid or underpaid. Around three-quarters of M&A transactions are priced on adjusted rather than reported earnings, so the quality of this adjustment directly sets the price. Clean, reconciled financials that support every add-back are worth real money; a normalisation a buyer cannot verify is simply ignored.

Share sale or business sale? The choice that changes your tax

One structural decision in a South African sale has an outsized effect on what you keep: whether you sell the shares in the company or the business and its assets out of the company. They are taxed very differently, and buyer and seller usually want opposite things.

Selling shares is generally simpler and more tax-efficient for the seller — the gain is a capital gain taxed at a lower effective rate. But buyers often prefer to buy the business and assets, because it leaves behind the company’s historic risks and lets them claim allowances on what they buy. A business (asset) sale can cost the seller more: potential recoupment of allowances previously claimed, and — because the sale proceeds land in the company — dividends tax of 20% when the cash is finally paid out to shareholders. The right structure is deal-specific and is exactly the sort of thing worth modelling before you agree a price, not after.

The 2026 tax change every seller over 55 should know

The February 2026 budget improved the small-business capital gains relief materially, and it is the most significant change to this relief in over a decade. For a qualifying business owner aged 55 or older, the CGT disposal exclusion rose from R1.8 million to R2.7 million, and the maximum business value threshold to qualify rose from R10 million to R15 million — bringing many more businesses into range. The annual individual CGT exclusion also rose to R50,000.

For an owner approaching retirement and a sale, this relief can change the net proceeds by a large amount, and the qualifying conditions — age, the value threshold, and ownership rules — reward planning the exit rather than stumbling into it. This is not tax advice and your specific position needs a tax professional, but no one should sell a business near these thresholds without checking where they fall.

What lifts the multiple before you sell

The multiple is not fixed by your sector alone; the same business can command very different multiples depending on how it presents. What consistently moves it up: reduced owner dependence (a business that runs without you is worth more than one that is you); clean, reconciled financials that make normalisation credible; recurring or contracted revenue over one-off sales; customer diversification rather than concentration in one or two clients; and a documented growth story a buyer can believe. Most of these take twelve to twenty-four months to build, which is why the best time to prepare a business for sale is well before you intend to sell it.

Where Caban fits

We advise business owners on the sell-side of a transaction: establishing a defensible valuation range, preparing the business and its numbers so the value survives a buyer’s due diligence, structuring the deal for the right after-tax outcome, and running the process and negotiation to close. A valuation you can defend is the foundation of every one of those steps — it is what separates an asking price a buyer engages with from one they walk away from. If you are thinking about selling, even a year or two out, the most valuable conversation happens before the number is set, not after an offer is on the table.