Most small businesses are valued on a multiple of their earnings, not on revenue and not on what the owner feels the business is worth. Understanding which earnings number buyers use, and what multiple is realistic for your type and size of business, is the difference between pricing it to sell and watching it sit on the market.
For most owner-operated businesses, buyers look at Seller's Discretionary Earnings (SDE) — your net profit with the owner's salary, perks, one-time costs, and non-cash expenses added back. SDE answers the buyer's real question: "How much money will this business put in my pocket each year?"
Larger businesses — generally those with more than a single full-time owner-operator, or above roughly $1–2M in earnings — are usually valued on EBITDA (earnings before interest, taxes, depreciation, and amortization) instead, because the buyer expects to hire management rather than run it themselves.
If a business has $300,000 in SDE and sells for a 2.5x multiple, the price is $750,000. The multiple reflects how risky and transferable the earnings are. Higher multiples go to businesses with:
Lower multiples go to businesses that are owner-dependent, have concentrated customers, show declining numbers, or have messy books.
These are general rules of thumb, not appraisals. Real multiples vary widely with size, location, margins, and market conditions, and the only way to know your number is a professional valuation. With that caveat:
| Industry | Usual basis | General range |
|---|---|---|
| Restaurants | SDE | ~1.5x – 3x |
| HVAC / home services | SDE | ~2x – 4x |
| E-commerce | SDE | ~2.5x – 4x |
| Professional services | SDE / EBITDA | ~2x – 4x |
| Manufacturing | EBITDA | ~3x – 6x |
See your industry's page for detail, and treat every range as a starting point to refine with a real valuation.
The fastest way to increase value before a sale is to reduce the buyer's perceived risk: document your processes so the business runs without you, lock in recurring contracts, clean up the books with proper accrual statements, and resolve any single-customer concentration. The fastest way to destroy value is messy financials that a buyer can't trust — uncertainty always gets priced as risk, and risk lowers the multiple.
A free online estimate (including ours) gets you in the ballpark. Before you list, get a professional valuation from a broker or a credentialed appraiser — it's the foundation of your asking price and your negotiating position.
Most small businesses are valued on a multiple of earnings (SDE for owner-operated businesses, EBITDA for larger ones). Start with a free estimate to get in the ballpark, then get a professional valuation before setting an asking price.
It varies widely by industry, size, and risk. Common general ranges run from about 1.5x to 4x SDE for Main Street businesses and higher EBITDA multiples for larger firms. These are rules of thumb, not appraisals.
Profit, almost always. Buyers care about the earnings the business will deliver to them, not top-line revenue.