What Is My Business Worth?

The real answer to what your business is worth — and the factors that move it higher or lower. From an advisor’s perspective, not a textbook.

Or try our Business Valuation Calculator for an instant estimate.

What's in This Guide

1. Why 'What Is My Business Worth?' Is the Wrong First Question

2. The Math: How Business Valuation Actually Works

3. Try It Yourself: Our Business Valuation Calculator

4,

Professional Valuation vs. DIY: When You Need an Expert

6. What Moves the Needle: The Five Factors Buyers Pay For

7. Common Valuation Mistakes That Cost Sellers Money

8. From Valuation to Action: Your Next Steps

Why 'What Is My Business Worth?' Is the Wrong First Question

You’ve probably thought about selling your business for a while. Maybe it’s been in the back of your mind for years, or maybe something changed recently — a health scare, a shifting market, a partner who wants out. Whatever brought you here, the decision to sell is one of the biggest you’ll ever make.

Here’s the hard truth most advisors won’t tell you upfront: the majority of businesses listed for sale never actually close a deal. Not because they’re bad businesses, but because the owners weren’t prepared, priced the business wrong, or chose the wrong advisor.

70% of business owners

have no idea what their company is worth. Of those who do, most overestimate by 50–100%.

Based on general M&A industry survey trends.

This guide is designed to change that for you. It covers the entire process from start to finish — not in theory, but based on how deals actually get done in the lower middle market (businesses between $750K and $10M in revenue). We’ll walk through valuation, preparation, finding buyers, deal structure, and what happens after closing.

If you’re wondering where you stand right now, our Exit Readiness Assessment takes about five minutes and will show you how prepared your business is for a successful sale.

The Math: How Business Valuation Actually Works

Every business owner has a number in their head — what they think their company is worth. In almost every case, that number is wrong. Not because you don’t know your business, but because valuation in M&A follows a different logic than the one you use to run your company.

Business valuation in the lower middle market typically comes down to a multiple of earnings. The question is: which earnings metric, and which multiple?

SDE vs. EBITDA: The Two Metrics That Matter

SDE

Seller’s Discretionary Earnings

Your net profit plus owner compensation, plus any personal or one-time expenses running through the business.

Best For: Owner-operated businesses under $2-3M revenue

EBITDA

Earnings Before Interest, Taxes, Depreciation & Amortization

Your net profit plus owner compensation, plus any personal or one-time expenses running through the business.

Best For: Professionally managed businesses with larger revenue

Sample SDE Calculation

Net Profit

$455,000

+ Owner Salary & Benefits

$150,000

+ Personal Vehicle Expense

$12,000

+ One-Time Legal Fee

$8,000

+ Depreciation & Amortization

$18,000

+ Interest Expense

$6,500

= Seller's Discretionary Earnings

$649,500

Typical Valuation Range (2.5x – 3.5x SDE)

$1,623,750

$2,273,250

What Drives the Multiple?

Three Valuation Approaches

Market Approach

Compares your business to similar businesses that have recently sold, using multiples from comparable transactions.

Best For: Established businesses in active markets

Income Approach

Projects future cash flows and discounts them to present value based on risk and expected returns.

Best For: Predictable, stable cash flows

Asset Approach

Values the business based on the fair market value of its tangible and intangible assets minus liabilities.

Best For: Asset-heavy or distressed businesses

Professional Valuation vs. DIY: When You Need an Expert

Feature

Online Calculators

Professional Opinion of Value

Cost

Free to $500

$2,500 - $10,000+

Time to Complete

5-15 minutes

2-4 weeks

Accuracy

Estimated range

Detailed, defendable valuation

Best Use Case

Initial curiosity, planning

Serious sale, SBA financing, disputes

Customization

Generic industry multiples

Navigating a Deal Right Now?

Talk to an advisor who’s been through it — confidentially, no obligation.

What Moves the Needle: The Five Factors Buyers Pay For

Revenue Quality & Predictability

Recurring revenue, long-term contracts, and predictable sales cycles command premium multiples. One-off project revenue is worth less.

Customer Concentration

If your top 3 customers represent more than 30% of revenue, buyers will discount heavily. Diversified customer bases reduce risk.

Owner Dependence

Can the business run without you? If you're the rainmaker, technician, or key relationship, expect lower multiples or earnouts.

Growth Trajectory

Consistent 15-20%+ annual growth in a stable market can add 0.5-1.0x to your multiple. Declining revenue kills deals.

Industry & Market Position

Hot industries (SaaS, healthcare IT) command premiums. Commoditized services (general contracting) get lower multiples.

Common Valuation Mistakes That Cost Sellers Money

Overvaluing Based on Gross Revenue

Buyers don’t care about revenue. They care about profit. A $5M revenue business with $200K profit is worth far less than a $2M revenue business with $500K profit.

Ignoring Add-Backs

Failing to properly document owner perks, one-time expenses, and above-market salaries leaves money on the table.

Using Peak Year Performance

Buyers discount one-time spikes. They want 3-year trends. A single great year won’t carry weight if the others are flat.

Assuming Your Industry Multiple Applies

Just because you read that SaaS companies sell for 6x doesn’t mean your SaaS company will. Quality matters more than category.

Not Accounting for Working Capital

Buyers expect you to leave enough working capital to operate the business. Draining cash before closing reduces your net proceeds.

Comparing to Public Company Multiples

Public companies trade at 2-3x the multiples of small private businesses due to liquidity, scale, and governance. Don’t use them as benchmarks.

From Valuation to Action: Your Next Steps

Get Your Number

Use our calculator or request a professional valuation to understand your baseline.

Improve What Matters

Focus on the five factors buyers pay for. Small changes can add significant value.

Go to Market

When you're ready, partner with an experienced advisor who knows your market.

Ready to Understand What Your Business Is Really Worth?

Get a free valuation estimate in minutes, or schedule a consultation with our team.

Common Mistakes Buyers Make

Buying a business requires a different mindset than building one from scratch.

How to Evaluate Risk When Buying a Business

Buying a business is rarely about finding opportunity — it’s about understanding risk.

Get a Data-Backed Valuation of Your Business

Schedule a free consultation with our M&A advisors to understand what your business is worth and how to maximize its value.

Work with a Partner Who's Been There.

Founder Bryan Bowles has built, acquired, and sold multiple companies. Let his experience guide your next move.

Get in Touch

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