Introduction

The valuation skills gap in Australia is not a new problem, and it’s getting worse. Over the last five years, the need for people who can build and interpret the meaning of real-world valuation difficulties – not just recall textbook techniques – has grown rapidly, as a result of a hot M&A market, the extension of corporate finance advice to mid-market companies and the increasing expectation that finance business partners can contribute to investment and strategy discussions. The number of people who can apply valuation theory to real-world problems has not increased.

The majority of finance professionals in Australia have had some exposure to valuation theory in university, a professional accounting course, or a structured training course. They know what DCF is, what EBITDA multiples are, and what the difference is between enterprise value and equity value. But many have difficulty creating a DCF model from scratch, based on a set of financial statements, justifying the assumptions to sceptical buyers, or explaining why their EBITDA multiple range is valid for a particular business rather than simply an industry average. The modelling vs theory gap in finance is the gap between knowledge and practice in valuation.

This article is for junior- to mid-level finance professionals interested in why finance professionals struggle and how to address this, as well as for managers and L&D professionals interested in developing practical solutions to the valuation skills shortage in their organisations. The roots of the gap are structural and solvable – and those who understand them are much better equipped to solve them.

The Gap Between Valuation Theory and Real-World Practice

Why are textbook valuation and applying valuation models in practice different skills

Textbook valuation is nice and neat. The financial statements are normalised, the comparable transactions are identified, the discount rate is specified, and the model spits out an answer you can check against the back of the book. The real-world practice of valuations is a different order of magnitude: the financial statements involve owner add-backs that must be identified and proven, the comparable transactions must be identified and adjusted for differences in structure, the discount rate must be justified with market evidence, and the valuation model produces a range rather than a single value that must be justified with business logic.

• Practically speaking, the problems with valuations start with the inputs: the financial statements are rarely normalised and ready for analysis, and the normalisation process determines the credibility of the rest of the work.

• The decision-making in valuation (deciding between valuation approaches, which multiple ranges to choose, and which comparable transactions are relevant) cannot be learned through studying examples where all the judgment was done by someone else.

The finance training gaps Australia that create the skills deficit

Finance training gaps in Australia in the area of valuation stem from one feature of the way valuation is taught: theory is taught, but practice is not. Professional accounting certifications provide an excellent coverage of valuation theory, but do not require students to develop a model from scratch, justify their assumptions, or grapple with the judgment decisions required in real transactions. Finance university courses cover the theory, but use data sets that are free of imperfections and do not reflect the uncertainty and incompleteness of the real world. The upshot is a group of professionals who know how to value but have never actually valued in a real environment.

• To learn valuation in realistic settings, students must deal with real or realistic financial data that includes its imperfections: incompleteness, non-arm’s-length transactions, non-standard items, and context that needs to be explored.

• The fastest learners in valuation are those who have been exposed to deal or transaction situations early in their careers; the slowest are those who have learned much about valuation, but only in the context of non-realistic, pre-cleaned data.

Five Root Causes of the Valuation Skills Gap in Australia

There are many reasons for the valuation skills gap in Australia. Still, five stand out when asked about why their own development was slower than it could have been, or why their staff are unable to bridge the gap between theoretical and practical skills.

Root Cause	How It Manifests	Finance Training Gaps in Australia: Implications	How to Address It
1. Education that teaches methodology without application	Professionals can describe DCF, EBITDA multiples, and comparable transactions in detail, but have never built a model from a real set of accounts without scaffolding or a pre-provided answer	Challenges in financial modelling persist because no formal training programme has required the professional to build the model, make the judgment calls, and defend the outputs under challenge	Build or seek programmes that require genuine model construction from raw data, not interpretation of pre-built models; practice matters more than re-exposure to the theory
2. Limited exposure to transaction-quality financial data	Most training uses simplified, well-formatted financial data; real transaction financial statements contain normalisation requirements, unusual items, and missing information that only become visible in live work	Real-world valuation difficulties are partly a data exposure problem: professionals who have only worked with clean teaching data are unprepared for the complexity of real financial information	Request access to anonymised or historical transaction data sets in training contexts; build the normalisation skill specifically, not just the modelling skill
3. No accountability for defending assumptions	In educational contexts, the model is the deliverable; in a real transaction, the assumptions are what get interrogated; most professionals have never had to defend their WACC, justify their multiple selection, or explain their normalisation to a sceptical counterpart	Common valuation mistakes professionals make — uncritical multiple application, unsupported discount rates, undocumented normalisation — are often symptoms of having never been required to defend their reasoning	Practise presenting and defending valuation conclusions out loud, not just building the model; seek feedback on the reasoning, not just the arithmetic
4. Sector knowledge gaps that undermine comparable selection	Selecting the right comparable transactions requires understanding which sector peers are genuinely comparable, which deal structures affect the observed multiple, and why multiples differ across subsectors — knowledge that requires sector exposure, not just methodology training	Practical valuation skills shortage is often a sector knowledge problem as much as a methodology problem: professionals who do not understand the business being valued cannot select appropriate comparables or challenge sector-generic inputs	Build sector knowledge deliberately alongside valuation methodology; read sector reports, follow disclosed transactions, and understand the commercial drivers of value in the sectors you work in
5. Feedback loops that are too slow or too indirect	In structured training, feedback is immediate; in real work, the quality of a valuation judgment is often not confirmed until weeks or months later, if ever — meaning that common valuation mistakes professionals make can persist undetected for extended periods	Why finance professionals struggle to develop real valuation capability is partly a feedback problem: without timely, specific feedback on their judgment, professionals cannot distinguish between reasoning that is sound and reasoning that merely produced an unchallengeable output	Seek direct feedback from senior practitioners on your valuation reasoning, not just your model outputs; debrief after every transaction, regardless of outcome

Root cause 3 – no accountability for defending assumptions – is the biggest gap that slows the development of valuation capability. Modelling is behind closed doors, defending is in public. Someone who can build a DCF with a technically defensible WACC, but who is unable to articulate why that WACC is appropriate for this business, in this market, at this time in the economic cycle, has done the technical work but has not yet done the commercial work that valuation demands. Using valuation models in real life means being capable of defending an opinion in a challenging environment – and that can only come with practice, and more practice, in realistic settings.

Bridging the Gap: Building Real Valuation Capability

A practical pathway for learning valuation in real scenarios

To learn valuation in real-world scenarios, the development path must include skills training, real or realistic data for practice, opportunities for feedback, and the accountability and scrutiny of having to justify conclusions to more capable audiences. The four-stage development cycle below is how the fastest-improving valuation professionals develop their skills.

Phase 1	Phase 2	Phase 3	Phase 4
Foundation & Raw Data	Model & Defend	Comparable Research	Live Deal Exposure
Study the core methodology; then practise immediately on real or realistic financial data with all its imperfections; complete the normalisation exercise before building the model; identify and research every unusual item	Build the full model; document every assumption with a specific rationale; present the valuation range out loud to a peer or mentor; respond to every assumption challenge without referring to the model	Research the sector independently; identify five comparable transactions from disclosed data; assess their structural comparability; adjust the multiple range based on the specific quality characteristics of the business being valued	Seek involvement in live advisory, M&A, or investment processes as early as possible; accept every opportunity to sit in on due diligence, negotiation, or board presentation regardless of your contribution level; learn through observation and debrief

Real cases: the valuation gap in practice

An analyst at a mid-sized advisory firm had graduated from a professional accounting course with a heavy valuation focus. She was assigned to her first real acquisition assignment and asked to complete the EBITDA multiples. The transactions she selected as comparable were technically right (same industry, similar size). Still, she failed to account for the fact that three of the five transactions had been structured as distressed sales, which depressed multiples. Her senior manager caught the error. Still, the experience highlighted a weakness that had never been fully tested in her training: that when valuations are tested, it’s not only the methodology that needs to be right, it’s also the ability to understand why the data points are or are not comparable. For the next three months, she developed her own comparable transactions database for her industry, with specific commentary on deal structure, purpose, and comparability. This resulted in a lasting improvement to her work.

The second example concerns a finance manager at a manufacturing company preparing the internal valuation for an anticipated divestment. He was proficient in financial modelling but had developed his DCF using a generic industry beta, without accounting for the business’s size, leverage, or geographical dispersion. When the external advisors examined his work, the WACC was 220 basis points lower than their estimate, and the DCF derived a range that was around 35 per cent higher than the sale price at which the business was ultimately sold. The mistakes that can be made in valuations like this are not mathematical mistakes; they are judgment mistakes made by following a textbook process without the commercial judgment that determines the suitability of the inputs. Problems in financial modelling at this level are not problems with the model; they are problems with the assumptions.

Conclusion

The problem of the valuation skills gap in Australia is structural and needs a structural fix: finance professionals who are allowed to practise valuation with real or real-like data, the responsibility to make and defend their assumptions, and specific feedback on their reasoning, develop real capability in valuation much more quickly than those who study the theory but not the practice. The gap between modelling and theory in finance is closed by practice, not by more study of the same theories in a simpler form.

For managers: capability in your team is a development programme, not a recruitment problem – if you want your analysts to develop real valuation skills, give them access to real data, exposure to live deals and the accountability of defending their assumptions and conclusions.

The most effective development opportunity for any finance professional to build real valuation capability is to practise on realistic data while defending their assumptions out loud; you learn to do valuation by doing it, not by studying it again.

Errors common to finance professionals in valuation – uncritical use of multiples, unrecorded assumptions, inappropriate selection of comparable companies – are all correctable through feedback; the fastest-developing professionals are those who request this feedback.