The short answer
A broker appraisal is a free or low-cost, unsigned opinion of likely selling price, prepared by a business broker pitching for a listing. A formal valuation is a signed report that sets out its method and its evidence. The two answer different questions, and using one where the other is required is the single most common defensibility failure Oliver Group sees in valuation files.
Two different questions
A broker appraisal answers one question: what do you think this will sell for, and will you list it with me? A formal valuation answers a different one: what is this worth, and can you demonstrate that conclusion to a third party who has every incentive to disagree with it? Both are legitimate exercises, and both have a place. The problem is not that broker appraisals exist: it is that owners routinely reach for one when the situation actually calls for the other, and only discover the mismatch when the ATO, a court or an ex-business-partner's lawyer asks to see the working papers.
What is a broker appraisal?
A broker appraisal is an opinion of likely selling price, typically prepared free or at low cost by a business broker or agent as part of pitching for the listing. It draws on the broker's experience of recent sales in the sector, a rule-of-thumb multiple applied to revenue or EBITDA, and a read of current buyer appetite. It is delivered quickly and framed around a single number or a narrow range presented with confidence. That confidence is the point: a broker appraisal exists to help an owner decide to list, and to set a starting expectation for what the campaign will target.
The incentive problem, stated plainly
The broker preparing the appraisal is usually the same party competing to win the listing mandate. A higher indicative price is a more attractive pitch. This is not an accusation of dishonesty, most brokers are giving a genuine professional read of the market, but the structure creates a built-in bias toward optimism, and there is no independence statement, no named methodology, and no obligation to document how the number was derived. There is also, typically, no consequence if the eventual sale price lands well below the appraisal, because the appraisal was never presented as anything other than a marketing estimate to begin with. That is the nature of the document, not a flaw in it: the flaw only appears when someone tries to use it for a purpose it was never built for.
What is a formal valuation?
The engagement carries structural obligations a broker appraisal does not: independence from the outcome (the valuer has no stake in a sale proceeding or a particular number being reached); a stated methodology, tested and documented rather than asserted; an evidence trail, comparables, financial normalisation, add-back support, discount and premium justification, retained in a working file; and sign-off by the lead valuer under an independence statement. The fee is fixed at engagement and is not contingent on the conclusion. If a client wants a target number, the discipline is to say so and decline the engagement on those terms, rather than produce one.
Is a broker appraisal enough for the ATO?
No: for CGT events, small business CGT concession eligibility (the maximum net asset value test under Div 152 ITAA 1997, the active asset test), Division 7A matters or related-party transfers under s 116-30 ITAA 1997 and the market value substitution rules, the ATO's expectation is a documented market value prepared on a defensible methodology, not an indicative sale estimate from an interested party. A broker appraisal typically has no stated methodology, no evidence pack, and an obvious commercial interest in the outcome. Where a concession claim or a related-party position is reviewed, a broker appraisal in the file carries close to the same evidentiary weight as no valuation at all: it does not survive scrutiny because it was never built to.
Can I use a broker appraisal in family law or a shareholder dispute?
No: in family law property settlements and shareholder or partnership disputes, the other side's lawyers will test the valuation evidence directly: who prepared it, what methodology was applied, whether the preparer had any interest in the outcome, and whether the working papers support the number. A broker appraisal fails on the first question alone, because the preparer had a commercial interest in a higher number (to win a listing) that is structurally opposed to the independence the forum requires. Courts and mediators expect valuation evidence prepared by an independent expert who can be, and is willing to be, tested on methodology. A broker is very rarely that person, and is very rarely willing to be cross-examined on it.
When is a broker appraisal the right tool?
A broker appraisal is genuinely the right tool in two situations. First, as an initial sale-readiness gauge, when an owner wants a rough sense of whether the business is saleable and roughly in what range, before committing time or cost to anything more formal. Second, in setting an initial listing price for a live sale campaign, where the number is a starting point for buyer interest and negotiation, not a number that has to hold up to a third party's scrutiny. In both cases, the appraisal is being used as a commercial planning input, which is exactly what it is built for.
How much does a formal valuation cost compared to a broker appraisal?
A broker appraisal is typically free or low-cost, because it is priced as part of pitching for a listing rather than as a standalone professional service. The cost gap is real, but it is small next to the cost of an unsupportable position being challenged: amended assessments, penalties, a second valuation prepared under pressure, or a settlement negotiated from a weaker evidentiary footing. Oliver Group's fees are set by the annual turnover of the business: a Small Business Valuation is $1,495 + GST for turnover under $2 million, a Medium Business Valuation is $2,495 + GST for turnover between $2 million and $10 million, and a Large Business Valuation is $3,495 + GST for turnover over $10 million. Small-business reports are delivered in 2 business days and medium-business reports in 3 business days; the delivery date for a Large Business Valuation is agreed before commencement. Delivery time starts once payment and all required information have been received. Retrospective valuation dates are +$495 each and additional entities are +$795 each. The fee is fixed in writing before work begins and never depends on the concluded value.
- ·Deciding whether to sell, roughly what range to expect: a broker appraisal is proportionate
- ·Setting an asking price for an active listing: a broker appraisal is proportionate
- ·CGT event, small business CGT concession claim, or related-party transfer: a formal valuation is required
- ·Family law property settlement or shareholder/partnership dispute: an independent formal valuation is required
- ·Any position going into an accountant's or lawyer's file that may later be queried: a formal valuation, not an appraisal
What we do not do
Oliver Group does not prepare broker-style sale appraisals, and we are not a business broker: we have no listing to win and no commission riding on a sale proceeding, which is the entire point of an independent valuation engagement. Where an owner's genuine need is a quick read on listing price, a broker is the right call and we will say so. Where the number needs to hold up to the ATO, a court, or a disputing party, that is our work: methodology tested, evidence documented, working file retained ten years. Oliver Group prepares independent valuations only: this is not tax, legal or financial advice, and your accountant or lawyer should be the one applying the valuation evidence to your specific position.