How the Estimate works

What it is — and what it is not

SMEInspect sense-checks the asking price. It does not confirm it. The Estimate follows the same convention buyers already know from property estimates: an automated figure shown as a range, with a confidence indicator, the inputs behind it, and a plain statement that it is a computer-generated estimate — not a professional valuation.

• Use: “the SMEInspect Estimate”, an indicative value range, an automated estimate, sense-check the asking price, general information.
• Never: valuation (as a noun for the service), appraisal, certified or verified value, confirm or confirms the price, advice or recommendation.

Always a range, never a point

The Estimate is always a low-to-high band. A single-point figure is never presented as “the answer”. The band is paired with a confidence indicator. Greater risk produces a lower and wider band — not a different single number.

How the range is built

The Estimate is a model output, not an appraisal. Each report shows the full working so you can challenge any input — transparent, not oracular.

1. Earnings basis. Start from buyer-supplied earnings — typically Seller's Discretionary Earnings (SDE) or EBITDA for the latest full period.
2. Normalise. Remove add-backs that cannot be substantiated from the supplied documents. Each removal is shown in the working and tied to a finding.
3. Apply a sector multiple range. Use industry-typical earnings multiples for the sector and size band, expressed as a low×–high× range (sourced from market multiple tables per market).
4. Compute the unadjusted range = normalised earnings × (low×, high×).
5. Apply a risk adjustment. A percentage haircut and/or band widening driven by severity-weighted findings — principally customer concentration, owner dependence, lease/premises risk, and earnings quality.
6. Publish the adjusted low–high band, the confidence indicator, and the full working (earnings basis, multiple, every adjustment).

The report must show the multiple used, the earnings basis, and each adjustment. For a step-by-step worked example with real numbers, see the sample report.

The confidence indicator

A three-level signal — Low / Medium / High — rendered as a 1/2/3-bar meter. It expresses how much trust to place in the range, driven by input quality and corroboration — not by how “good” the business is. Confidence is set by the Coverage ledger, not chosen by hand. The report states why the level was assigned.

Closing the missing-information checklist in your report is the path to raise confidence (for example, Medium → High). That makes the limitation actionable rather than a caveat to bury.

When information is missing

The Estimate reflects only the documents and data you supply. Sparse, unverified, or incomplete inputs widen the range and lower confidence. SMEInspect cannot detect what a seller withholds. Uploading more — and reconciling earnings to independent records such as BAS, bank statements, or tax returns — narrows the band and raises confidence where the data supports it.

Important — please read