Every owner asks the same first question: what is my business worth? The honest answer is a range, not a number — and the range depends on how a buyer reads your financials, your risk, and your industry. Here is how valuation actually works, in plain English.
SDE vs. EBITDA: the two numbers buyers price
Smaller, owner-operated businesses are usually valued on SDE (Seller’s Discretionary Earnings) — your profit with the owner’s salary, perks, and one-time costs added back, because a new owner won’t carry those exact expenses. Larger or manager-run businesses are valued on EBITDA (earnings before interest, taxes, depreciation, and amortization), which assumes a hired manager in the seat.
Getting the add-backs right is where value is won or lost. A defensible recasting of your financials — documented, not hand-waved — is often worth more to your final price than any negotiation tactic.
What really drives your multiple
Your business sells for a multiple of SDE or EBITDA. That multiple isn’t random — buyers pay more for less risk and more durability:
- Owner dependence. If the business runs without you, it’s worth more.
- Revenue quality. Recurring, contracted, or repeat revenue beats one-off sales.
- Customer concentration. No single client should be able to sink the ship.
- Clean books & systems. Documented processes and tidy financials reduce buyer risk.
- Growth & margins. A clear growth story and healthy margins expand the multiple.
From sale price to what you actually keep
The headline price is not your outcome. Deal structure, taxes, working-capital adjustments, and how the payout is split between cash, seller financing, and earn-outs all change what lands in your account. We model after-tax proceeds before you ever go to market — because keeping more of a fair price beats chasing a big number you never actually collect.
Why a real valuation beats a calculator
Online calculators multiply one number by an industry average and call it a day. They can’t see your add-backs, your customer mix, or your local buyer demand — the things that move your value by six or seven figures. A real valuation is done by people who sell businesses like yours every month and know what buyers in your market will actually pay.
A valuation is a starting line, not a verdict. The number you get to keep is decided by preparation, positioning, and negotiation — and that’s the work we do.