By Bruce McGechan, CVA — Fealty Business Valuations · Last reviewed 14 September 2026
A broker appraisal is a simplified estimate of what a business might sell for. It usually applies one of the three valuation approaches, the market approach, and it’s usually free, because the broker earns a commission if you list the business with them.
An independent business valuation considers all three approaches, works through the balance sheet to an equity value, follows professional standards, and comes from someone with no financial interest in what the number turns out to be. In New Zealand it costs between $2,200 and $15,000 plus GST, depending on who does it and what it’s for.
Both are useful. They answer different questions, and the gap between them matters most when somebody other than you has to accept the figure.
This page is for information only. It isn’t legal, tax, or financial advice. Talk to your lawyer, accountant, and a qualified valuer about your own situation.
| Appraisal | Valuation | |
|---|---|---|
| Who produces it | A business broker, usually licensed under the Real Estate Agents Act 2008. | A credentialled valuer (CVA, ABV, CBV, CFA, or CAANZ Business Valuation Specialist). |
| Cost | Free. | $2,200 to $15,000 and up, plus GST. |
| Approaches used | The market approach most of the time. | Income, Market and Asset, all considered. |
| Methods considered | Usually one. | Around nine sit under the three approaches. |
| Balance sheet | Rarely examined. | Worked through to an equity value. |
| Value | Enterprise value, the value of debt and equity together. | Equity value, what the shareholders own. |
| Professional standards | None that govern method. | NACVA standards or APES 225. |
| Independence | The appraiser earns a commission if you list and sell. | The fee doesn't change with the conclusion. |
| Turnaround | Days. | 3 to 8 weeks once the information is in. |
| Use in a shareholders' agreement | No. | Yes. |
| Use in court | No. | Yes, where the valuer is credentialled and experienced. |
| Use with IRD | No. | Yes, where the engagement letter specifies it. |
The market approach values a business by reference to what similar businesses have sold for, in the same way a house is priced off recent comparable sales. The valuer or broker finds transactions, calculates ratios from them, and applies the best fit to the subject company. Because it draws on the market and nothing else, an appraisal is sometimes called a market appraisal.
Part of that work is calculating a form of earnings. For New Zealand small businesses that’s Seller’s Discretionary Earnings, also written as EBPITDA, which is EBITDA with one shareholder’s wage added back. It represents everything available to pay debt and equity holders, and it’s the measure BizStats uses, so it’s the measure the comparable data is built on.
Mid-market businesses use ordinary EBITDA instead, with no shareholder salary added back.
Either way the earnings figure is adjusted for one-off and discretionary spending.
Plenty of the time it is. If you’re working out whether a sale is worth pursuing at all, an appraisal answers that quickly and costs nothing.
The same goes for pre-listing price guidance where the broker is going to run the sale anyway, their read on the market is worth having.
And if you want a rough orientation figure with no third party to satisfy, an appraisal is fit for that purpose. The problems start when the number has to do a job it was never built for.
An appraisal usually reports the enterprise value, sometimes called the Market Value of Invested Capital, which is the value of the debt and the equity together. That’s the headline sale price. The cash the seller walks away with on settlement day is a different figure.
Getting from one to the other means working through the balance sheet: taking out long-term debt, dealing with the working capital that the seller keeps in an asset sale, stripping out the assets already counted inside the sale price, and setting aside non-operating assets like a holiday home or a boat that have nothing to do with the business. That calculation is the difference between a headline figure and a settlement figure, and an appraisal doesn’t attempt it. A valuation report does.
To be fair to brokers, they’re usually asked what the business will sell for, not what the seller nets on settlement day. They’re answering the question they were given.
There’s a second balance sheet question in share sales. Smaller businesses tend to sell as asset sales, and my estimate is that around 95% of the small-company transactions in BizStats are asset sales. Mid-market businesses go either way, which may mean a different transaction database with different rules about what’s included in a price, so the notes on the database matter.
In a share sale the business transfers with its working capital, and the debt still comes out to get to equity. An actual transaction settles debt-free and cash-free, so you remove the debt and add the cash back. Because the accounts won’t be finalised for weeks, the working capital at settlement is estimated, and that estimate is called a peg. When the true figure arrives, the difference is paid or refunded.
Outside a handful of industries, hospitality being the obvious one, there are often too few genuinely similar sales to support the market approach. Thin data still produces a number but it should be ignored if the dataset is to small.
Low profits are the second issue. The method can produce a very low value.
The third reason is the one that matters most. There are three approaches and roughly nine methods sitting under them, and which one fits depends entirely on the circumstances of the individual business. Professional standards require a credentialled valuer to consider all three approaches and to document why any were set aside. Reaching for one method by default skips that reasoning.
A broker who appraises your business earns nothing from the appraisal and a commission if you list and sell. That’s an ordinary business model but it puts the person estimating the price on one side of the outcome, read Broker appraisal conflicts of interest.
New Zealand regulates the conduct side of this. Business broking generally falls under the Real Estate Agents Act 2008 licensing regime, which governs behaviour and client money. It doesn’t set valuation methodology.
There’s no statutory credential for business valuers here at all, which is exactly why the voluntary ones carry the weight. A CVA, ABV, CBV, CFA or CAANZ Business Valuation Specialist has agreed to work under a published standard, and the engagement letter says so.
I’ve written separately about how the incentive shows up in the number, and what to ask any appraiser before you accept their figure.
The test is simple enough. Does somebody who didn’t choose the appraiser have to accept the number?
That covers a shareholder buyout or any buy/sell trigger under a shareholders’ agreement, relationship property matters, disputes heading anywhere near the Companies Act 1993, family succession, and anything going to IRD. In each case the figure will be read by a person with their own interests and their own adviser, and it has to survive that reading.
If the answer is no, and you’re orienting yourself before deciding what to do, an appraisal will do the job.
An appraisal is free.
I’ve set out the full breakdown, including what drives the price up and down, in the article on how much a business valuation costs in New Zealand.
Is a business appraisal the same as a business valuation?
No. An appraisal is a simplified estimate, usually built on the market approach alone, usually free, and usually produced by a broker. A valuation considers all three approaches, follows professional standards, works through to an equity value, and is produced by someone independent of the transaction.
Can I use a broker’s appraisal for a shareholders’ agreement?
Not safely. Most buy/sell clauses call for a valuation by an independent expert, and an appraisal from a broker with a commercial interest in the sale is open to challenge on both independence and method. If the other shareholder’s lawyer looks at it, that’s the first thing they’ll raise.
Why is a broker appraisal free?
Because it buys the listing. The broker earns a commission when the business sells, and the appraisal is the document that gets the agency agreement signed.
Will a court accept a broker appraisal?
Generally no. Courts look for a credentialled valuer with relevant experience and continuing professional education, working to a recognised standard, whose methodology can be examined. An appraisal typically doesn’t define its standard of value, its level of value, or its premise of value, which leaves very little to be examined.
I’m selling to a third party anyway, so do I need a valuation?
Often not. If you’re listing with a broker and selling on the open market, an appraisal plus a good broker may be all you need. Get a valuation when there’s an internal party involved, when the sale is part of a succession plan, or when you want to know your settlement figure rather than your asking price.
Fealty offers fixed-price independent business valuations. You know the cost before the work starts. See pricing and what’s included.
About the Author
Bruce McGechan, CVA — Fealty Business Valuations
Bruce McGechan is a Certified Valuation Analyst (CVA), credentialled by the National Association of Certified Valuators and Analysts (NACVA), and a Certified M&A Advisor. He has valued 90 privately held New Zealand businesses across many sectors. Based in Palmerston North and working nationwide, he prepares independent valuations for shareholder buyouts, succession and pre-sale planning, and relationship property and shareholder disputes. His work applies NACVA professional standards to New Zealand conditions — local transaction evidence, NZ tax settings, and the thin-market realities of owner-operated and mid-market companies.
Talk to Bruce: 021-245-8881