Cafés are the most commonly sold small business in Australia — and the most commonly mispriced. Every week, cafés come to market at prices that no informed buyer will pay, sit unsold for six to twelve months, and eventually sell at a significant discount or close entirely. The owners who avoid this outcome are the ones who understand how buyers actually value a café before they set an asking price.
The valuation basis: SDE, not revenue
Cafés are valued on Seller's Discretionary Earnings (SDE) — not revenue, not turnover, and not the number of coffees sold per day. SDE is the total economic benefit to the owner: net profit after all business expenses, plus the owner's salary, superannuation, and any personal expenses legitimately run through the business.
A café turning over $800,000 per year is not worth $800,000. It is worth a multiple of what it earns after paying all costs — including a market-rate wage for the owner's labour. If the owner works 60 hours a week and pays themselves $60,000, the SDE calculation needs to reflect what it would cost to replace that labour at market rates.
Current multiples for Australian cafés
Cafés in Australia currently trade at 1.5× to 2.5× SDE. The multiple is determined primarily by three factors: rent as a percentage of revenue, lease length, and whether the business can run without the owner.
| Rent as % of revenue | Lease remaining | Typical multiple |
|---|---|---|
| Under 8% | 5+ years | 2.2–2.5× |
| 8–12% | 3–5 years | 1.8–2.2× |
| 12–15% | 2–3 years | 1.5–1.8× |
| Above 15% | Any | Hard to sell — buyers walk |
Why rent kills more café deals than anything else
Rent is the fixed cost that never goes away. In a good month, high rent is manageable. In a slow month — school holidays, bad weather, a new competitor opening nearby — high rent is the difference between breaking even and losing money. Buyers understand this, and they will not pay a premium for a business where the rent leaves no margin for error.
The benchmark is rent below 10% of revenue. At that level, the business has enough margin to absorb a bad month, pay a manager, and still generate a return for the buyer. Above 12%, buyers start to discount. Above 15%, most buyers walk away entirely, regardless of how good the coffee is.
The lease is the asset
In a café, the location is everything — and the location is the lease. A café with a great location and a short lease is not worth much, because the buyer is taking on the risk that the landlord will not renew, or will renew at a significantly higher rent. Buyers need a minimum of three years remaining on the lease, with options, before they will make a serious offer.
If your lease is expiring within 18 months, the most important thing you can do before going to market is approach the landlord and negotiate a renewal. A new five-year lease with options, signed before you go to market, can add 30–50% to the sale price.
What a buyer is actually buying
A café buyer is buying a system — a location, a lease, a fit-out, a customer base, and a set of operational processes — that generates a predictable income. They are not buying the owner's personality, the owner's relationships with regulars, or the owner's ability to make a perfect flat white. The more the business depends on the owner's personal presence, the less it is worth to a buyer who needs to run it without that person.
The cafés that sell quickly and at good prices are the ones where a competent manager could run the operation on day one. That means documented processes, trained staff, a reliable supplier network, and a POS system with clean sales data.
