How much is my business worth?

The profit on your tax return is not the number a buyer uses. Buyers normalize earnings by adding back costs that belong to you rather than to the business. Two figures are common.

• SDE (Seller's Discretionary Earnings) is used for owner-operated businesses. It is net profit plus one owner's salary and benefits, plus interest, taxes, depreciation and amortization, plus genuine one-time and personal expenses.
• EBITDA is used for larger businesses that already pay a manager to do the owner's job. It is the same calculation but without adding back the owner's compensation, since a buyer would still have to pay someone to run it.

As a rough dividing line, businesses under roughly one million dollars of earnings tend to trade on SDE, and larger ones on EBITDA.

A regional service company with three million dollars of revenue reports two hundred and ten thousand in net profit.

At a multiple of three, that business is worth about $1.55 million; at a multiple of four, about $2.07 million. The half-million dollar difference is the entire reason the next section matters.

Multiples vary by industry, size and quality. These are the broad ranges buyers work from for privately held companies. Treat them as orientation, not as a quote.

Businesses with contracted, recurring revenue sit at the top of these ranges. Project-based businesses that start each year at zero sit at the bottom.

• Recurring or contracted revenue rather than one-off projects
• A management team that runs the business without you in every decision
• A diversified customer base with no single client above roughly ten to fifteen percent of revenue
• Clean, reviewed financials that match the tax returns
• Three years of stable or growing revenue and margins
• Long-tenured staff and low turnover in skilled roles
• Transferable contracts, licenses and a lease with real term remaining
• A defensible position: specialized expertise, a strong local name, or hard-to-replace relationships

• The owner is the business, holding the customer relationships and the technical knowledge
• Heavy customer concentration, where losing one account changes everything
• Declining revenue, or margins that have thinned over three years
• Books that require explanation, cash handling, or commingled personal spending
• Deferred maintenance on equipment or facilities the buyer will inherit
• A short lease, a landlord relationship that depends on you, or licenses that do not transfer
• Pending litigation, tax liabilities, or unresolved regulatory issues

What you keep depends on structure and tax treatment as much as on price. An asset sale and a stock sale with the same headline number can leave you with materially different amounts. Deals also commonly include a seller note or an earnout, meaning part of the price arrives later and carries risk.

Ask any buyer for the cash-at-closing figure separately from the total price, and have a tax advisor model the structure before you sign a letter of intent. The IRS explains the basic asset-versus-stock treatment in its guidance on the sale of a business.

A formal valuation from an appraiser is worth it if you need it for estate planning, a partner buyout or a dispute. If you simply want to know whether a sale makes sense, a serious buyer will give you an honest range after seeing three years of financials, usually within a week. Ours comes with no obligation, and we will tell you plainly if we are not the right fit. Share your business profile to start there.