What is a "Request for Estimated Selling Price"?

 

"Estimated selling price application" is a formal process in which the business owner (seller) requests a professional estimate from a licensed business broker regarding the business's potential market price or price range. This is typically one of the early steps in the process of preparing a business for sale.

​

In Australia, business brokers must comply with the relevant laws of each state when providing valuations of businesses. These valuations are not formal valuation reports, but rather professional judgments based on the following factors:

​

• Industry benchmark data

• A company's financial performance (e.g., adjusted net profit, seller's free cash flow (SDE), EBITDA).

• Recent transaction cases of similar companies

• Current market environment

• Intangible assets (such as goodwill, geographical location, brand value, etc.)

🔍 Key features of the "Estimated Selling Price Request"

​

The purpose is to help business owners understand the reasonable price range that their businesses can achieve in the market.

​

Process brokers typically review a company’s financial data, meet with the business owner, and research recent sales records of comparable companies.

The output provides a written or oral price range estimate, usually presented as a brief report or an appraisal letter.

In some states (such as New South Wales), information disclosure requires brokers to provide Form 5 or a similar document, clearly stating the estimated selling price and the method of estimation.

Legally compliant brokers are prohibited from making misleading statements to sellers or buyers. Under Australian Consumer Law, offering a price significantly higher than the market value constitutes "misleading and deceptive conduct."

 

Why is the "estimated selling price application" important?

​

• Help sellers set reasonable price expectations and avoid blindly setting prices;

• To provide a basis for developing marketing strategies and negotiating positions;

• This helps brokers fulfill their licensing and consumer protection obligations.

• This allows business owners to make more informed decisions before formally signing an "exclusive agency agreement."

​

Legal Considerations

​

• In New South Wales, under the Property and Stock Agents Regulation 2022, brokers are required to provide a written estimated selling price.

• The estimated prices provided must be based on reasonable evidence, such as corporate financial records and market data;

• If the agent obtains new information later, they are obligated to update the estimated selling price in a timely manner.