What’s a Supermarket Worth? Valuation Multiples & the 5% Rent Rule

When valuing a privately-owned supermarket, most buyers in Australia focus on EBITDA. But savvy acquirers know the real cost is higher—because you’re not just buying goodwill, you’re also buying stock.

🧮 Typical Pricing: 2.5x to 3.8x EBITDA + Stock

Effective total pricing often reaches ~4x EBITDA once stock is added

Most Australian SME supermarket sales are structured as:

Purchase Price = Goodwill (based on EBITDA multiple) + Stock at Cost

For example:

EBITDA: $600,000

Deal Multiple: 2.8x → $1.68M goodwill

Stock at Cost: $400,000

Total Deal Size: $2.08M → 3.47x effective multiple

In many deals, stock adds 0.5x to 1x to the implied EBITDA multiple. That’s why buyers use the total price, not just goodwill, to assess return on investment.

Rent Under 5% of Sales: A Key Green Light

There’s a reason brokers and financiers flag rent-to-sales as a headline KPI.

Buyers look for rent to be 5% of gross sales or less.

If rent creeps toward 6% or more:

Profitability compresses

Lease risk rises

Buyer appetite cools

A secure lease with below-market rent and fixed annual increases can materially lift valuation. Conversely, a lease with short term remaining, CPI-plus reviews, or above-market rent will drag multiples down, regardless of EBITDA.

What Justifies a Higher Multiple (or Higher Total Price)?

To land at the upper end of the range—2.8x to 3.8x goodwill plus stock—you’ll typically need:

✅ EBITDA of $400K+

✅ Manager-run operation (owner off the tools)

✅ Rent <5% of sales with 5–10 year lease runway

✅ High stock turnover (10–12x/year) and minimal shrinkage

✅ Strong POS reporting and clean, verified accounts

Capital Lock-up: Stock Can Make or Break ROI

Buyers don’t just ask, “How profitable is it?” They ask:

“How long until I get my money back?”

Here’s the formula many use:

(Goodwill + Stock) ÷ Annual Profit = Years to Breakeven

If your supermarket nets $500K and the buyer is asked to outlay $2M (including stock), that’s a 4-year capital recovery. For many, that’s right on the limit—especially in today’s high interest environment.

Low stock turnover (under 6x/year) or stock overhang of $600K+ can tip deals into restructure territory—via:

Vendor finance

Working capital caps

Earnouts based on breakeven

Summary for Sellers

If you’re preparing your supermarket for sale:

Target rent below 5% of turnover

Right-size stock to reduce capital drag

Show clean financials with growth or margin stability

Highlight management systems and owner independence

Buyers will pay up to 3.8x EBITDA plus stock—but only if the store passes the capital recovery and risk tests. Hope is not a strategy. In most cases, your total price needs to give the buyer a clear path to ROI within 3–4 years.