What's my business worth?

How business valuation actually works

Almost every small and lower-middle-market business is valued the same way: take a measure of profit, then multiply it by a number that reflects how much buyers will pay for a dollar of that profit in your industry. That number, the multiple, is where all the nuance lives.

For owner-operated businesses (roughly under $1M in earnings), buyers use Seller's Discretionary Earnings (SDE): net profit plus the owner's salary and one-time or personal add-backs. For larger businesses that already have a management team, buyers use EBITDA (earnings before interest, taxes, depreciation, and amortization). SDE multiples run lower than EBITDA multiples because SDE already includes the owner's pay.

Typical earnings multiples by industry

These are indicative lower-middle-market ranges. Useful for orientation, not a quote. Recurring-revenue and roll-up-favored sectors sit at the top; thin-margin, owner-dependent ones sit at the bottom.

Industry	Typical multiple	Basis

Ranges are aggregated, indicative figures based on typical lower-middle-market transactions and are not a valuation. See our EBITDA & SDE multiples by industry report for the full breakdown and the methodology behind them.

What moves you within the range

• Growth. Consistent year-over-year revenue growth is the single biggest multiple driver.
• Recurring revenue. Contracts, subscriptions, and service agreements de-risk the cash flow and command a premium.
• Margins. Higher and more stable margins than your peers push the multiple up.
• Customer concentration. If one client is more than ~15-20% of revenue, buyers discount for the risk of losing them.
• Owner dependence. A business that runs without the owner is worth more than one that is the owner.
• Clean books. Reviewed or audited financials and documented add-backs hold value through diligence.

The four ways to value a business

The earnings-multiple method above is the market approach, and it's how most deals actually price. The other three get used as cross-checks:

• Market approach. Earnings times a multiple drawn from comparable sales. This is the default.
• Income approach (DCF). Projects future cash flows and discounts them to today; common for higher-growth or larger businesses.
• Asset approach. Net value of assets minus liabilities; a floor, used for asset-heavy or distressed businesses.
• Rule-of-thumb. Industry shorthand, like a multiple of revenue; a sanity check, never a final number.

Learn the full process in our guide to selling your business, or read business valuation methods explained.

What's a business worth at different profit levels?

People usually ask this in terms of revenue, but value tracks profit, not sales. Two companies with the same revenue can be worth very different amounts depending on what drops to the bottom line. Here's the rough market math at a few common earnings levels (illustrative, using a mid-range 4x multiple):

• $100,000 in profit (SDE): roughly $200,000 to $400,000. Smaller, owner-run businesses sit at the lower end of the multiple range.
• $300,000 in profit: roughly $750,000 to $1.5M, depending on industry and how much the business leans on the owner.
• $500,000 in profit: roughly $1.5M to $3M. At this size buyers start paying for systems and a team, not just cash flow.
• $1M in EBITDA: roughly $4M to $9M. Recurring revenue and steady growth push you toward the top.

If you're thinking in revenue terms, a common question is what a business doing, say, $1M in sales is worth. The honest answer is that it depends entirely on margin. A $1M-revenue business keeping $250,000 in profit is worth far more than one scraping by on $40,000. Run your actual earnings through the calculator above for a closer estimate.

The income approach, in plain terms

Larger and faster-growing businesses often get valued on a discounted cash flow (DCF) basis instead of a simple multiple. The idea: estimate the future cash the business will generate, then discount those cash flows back to today using a rate that reflects the risk of actually collecting them. A safer, predictable business gets a lower discount rate and a higher value. A volatile one gets marked down. It's really another way of pricing the same thing, the return a buyer earns on their investment, and the market multiple usually lands close to what a sensible DCF would say.

What this estimate leaves out

An earnings-multiple range gives you enterprise value, the value of the business itself. The check that hits your bank account is different. A few things move between the headline number and your net proceeds:

• Net debt. Outstanding loans come off the top; excess cash can be added back.
• Working capital. Buyers expect a normal level of working capital to come with the business, which can adjust the final figure.
• Taxes. How the deal is structured (asset vs. stock sale) changes your tax bill, sometimes a lot. Talk to a CPA early.
• Deal structure. Earnouts, seller financing, and rollover equity all change how much you get and when.

These are exactly the factors a good advisor models before you go to market, which is why a calculator is a starting point and not the final word.