What Is My Business Worth? (2026) A Simple Framework to Estimate Value
If you're Googling "what is my business worth?", you're already ahead of 90% of owners.
Most founders have no idea what their company would sell for, and the ones who think they do are usually wrong. They're anchored to revenue, or a number a friend got, or a multiple they saw on Twitter.
This page gives you a real framework: how professional buyers actually value businesses, what drives the number up or down, and how to get a defensible range, not a guess.
The short answer: your business is worth a multiple of profit
For most founder-led businesses between $1M and $50M in revenue, value is based on a simple formula:
Business Value = Normalized Profit × Multiple
The two variables that matter most:
Your normalized profit: what the business actually earns after adjustments
Your multiple: a number that reflects risk, growth, and buyer demand
Get either one wrong and your valuation is off, sometimes by millions.
Step 1: Calculate your true profit (normalized earnings)
Your tax return is not your valuation. Neither is your QuickBooks P&L.
Buyers care about normalized earnings: what the business would earn under a new owner with clean accounting. This means:
Remove one-time expenses: lawsuits, relocations, COVID adjustments, one-off projects
Adjust owner compensation to market rate: if you're paying yourself $80K or $800K, buyers will normalize to what a hired GM would cost
Strip out personal expenses: the truck, the family cell phones, the "business trip" to Maui. Yes, buyers will find them.
Normalize rent: if you own the building and charge yourself above or below market, adjust
Account for deferred spending: if you've been underinvesting in staff or systems, buyers will factor that in
The goal: a clean, defensible number that any buyer can trust.
SDE vs. EBITDA: which metric applies to you?
Depending on the size of your business, buyers use one of two profit metrics:
SDE (Seller's Discretionary Earnings): used for smaller businesses, typically under $1M in profit. SDE adds back the owner's full salary and benefits.
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): used for larger businesses. EBITDA includes a market-rate management salary.
The crossover point is roughly $750K–$1.5M in earnings. Below that, you're in SDE territory. Above it, most buyers use EBITDA.
This distinction matters. A business valued at 4x SDE and one valued at 4x EBITDA are very different numbers because SDE includes your salary and EBITDA does not.
Step 2: Understand your multiple range
Multiples are not random. They are a direct reflection of risk and buyer demand.
What pushes multiples higher
Recurring revenue: subscriptions, contracts, retainers that renew predictably
Customer diversification: no single client above 10–15% of revenue
Strong margins: gross margins above 50% signal pricing power
Management team: if the business runs without you, it's worth more
Growth: consistent 10–20%+ annual growth commands a premium
Clean books: GAAP or accrual-basis financials, ideally reviewed or audited
Size: bigger businesses almost always earn higher multiples
What pushes multiples lower
Founder dependency: you are the business, the rainmaker, and the operator
Customer concentration: one client leaving could crater revenue
Project-based revenue: every quarter starts at zero
Declining trends: even flat revenue raises questions
Messy financials: if buyers can't trust the numbers, they discount everything
Deferred maintenance: underinvestment in people, technology, or infrastructure
Typical multiple ranges by business size
These are rough directional ranges; your industry and quality factors shift the number significantly:
| Annual Profit | Typical Metric | Multiple Range |
|---|---|---|
| $200K–$500K | SDE | 2x–3.5x |
| $500K–$1M | SDE / EBITDA | 3x–5x |
| $1M–$3M | EBITDA | 4x–6.5x |
| $3M–$5M | EBITDA | 5x–6.5x |
| $5M–$10M+ | EBITDA | 6x–7x |
Multiples above 7x are uncommon in our market. They usually take scale, recurring revenue and a competitive process.
For industry-specific ranges, see our full guide: EBITDA Multiples by Industry (2026)
Step 3: Know what type of buyer you're selling to
Buyer type changes both price and deal structure. Not all buyers are created equal.
Strategic buyers
Companies in your industry (or adjacent) that acquire for synergies such as cross-selling, geographic expansion, technology, or talent. They can often justify paying more because the combined entity is worth more than the sum of its parts.
Example: A national HVAC platform buying a regional competitor to enter a new market.
Private equity / financial sponsors
PE firms buy businesses as investment vehicles. They typically want a platform (the first acquisition) and then bolt on smaller companies at lower multiples. If you're a platform candidate, expect competitive pricing. If you're a bolt-on, expect a lower multiple but faster close.
Read: Should You Sell Your Business to Private Equity? →
Independent / funded operators
Individuals (often ex-corporate or MBA) backed by investor capital, buying a business to run as CEO. They tend to be cash-flow focused and may be more conservative on pricing, but can be excellent partners for owners who care about legacy and culture.
Employee buyouts (ESOP / MBO)
Selling to your management team or employees. Often lower price but higher certainty and continuity.
Step 4: Pressure-test the number with deal structure
Here's where most owners get tripped up: price and proceeds are not the same thing.
Two offers can have the same headline number and deliver very different outcomes:
Cash at close: what you actually walk away with on Day 1
Seller note: you're financing part of the deal. Risk is on you.
Earnout: future payments contingent on performance targets. Only as good as the targets and the buyer's integrity.
Working capital adjustment: buyers expect you to leave a certain level of cash and receivables in the business. Misunderstand this and you lose hundreds of thousands at closing.
Equity rollover: you keep a stake in the combined entity. High upside, but illiquid.
A "6x offer" where 40% is in earnouts and seller notes is not the same as a "5x offer" that's all cash at close.
Read: Private Equity Rollovers: How to Sell Your Company Twice →
A worked example
Let's say you own a digital marketing agency:
Revenue: $4M
Owner salary: $350K (market rate for a GM would be $180K)
One-time legal expense last year: $40K
Personal expenses run through the business: $25K
Normalized EBITDA calculation:
| Line Item | Amount |
|---|---|
| Reported EBITDA | $800K |
| • Owner salary above market ($350K − $180K) | +$170K |
| • One-time legal | +$40K |
| • Personal expenses | +$25K |
| Normalized EBITDA | $1,035K |
Valuation range:
Conservative (4.5x): $4.66M
Base (5.5x): $5.69M
Optimistic (7x): $7.25M
If the agency has 80% retainer revenue, diversified clients, and a strong account management team, the optimistic case is realistic. If it's project-heavy and founder-dependent, the conservative case might be generous.
The 7 most common valuation mistakes
Using revenue multiples when profit multiples apply: Revenue multiples are for high-growth SaaS and VC-backed companies. Most SMBs trade on profit.
Not normalizing earnings: Your tax return understates value (by design). If you don't normalize, you're selling yourself short.
Anchoring to a friend's deal: Their business is not your business. Different margins, different risk, different buyer pool.
Ignoring customer concentration: "Our biggest client has been with us for 15 years" doesn't eliminate the risk. Buyers still discount it.
Overstating addbacks: Aggressive normalizations erode trust. Be honest about what's a real addback vs. wishful thinking.
Forgetting deal structure: A $10M offer with 50% earnout is a $5M offer with upside. Model your worst case.
Waiting too long: The best time to sell is when you don't have to. Urgency kills leverage.
How to increase your business value before selling
If your valuation isn't where you want it, the good news: most of the levers are in your control. Even 12–24 months of focused effort can meaningfully shift the number.
High-impact moves:
Convert project revenue to recurring: retainers, subscriptions, or maintenance contracts
Reduce customer concentration: diversify revenue across more clients and segments
Build a management layer: hire or promote someone who can run the business day-to-day
Clean up financials: move to accrual accounting, separate personal expenses, produce monthly financial packages
Document processes: SOPs, playbooks, and systems reduce key-person risk
Lock in contracts: long-term agreements with clients, vendors, and key employees
FAQ
Can I get a valuation without selling?
Yes, and we recommend it. Getting a professional valuation 12–24 months before a potential sale lets you identify value leaks and fix them before going to market. Think of it as a diagnostic, not a commitment.
What if my financials aren't clean?
That's normal. Most owner-operated businesses have some level of financial noise. We can still give you a defensible range once earnings are normalized, but cleaning up your books before going to market will increase buyer confidence and your multiple.
How long does it take to sell a business?
Typically 6–12 months from listing to close for businesses in the $5M–$50M range. Add 3–6 months of preparation before that. Rushed processes usually leave money on the table.
Read: How to Sell a Business in Canada →
Do I need an M&A advisor?
You don't need one, but the data is clear: businesses sold through advisors consistently achieve higher multiples, better terms, and more competitive processes than those sold directly.
Read: How to Find the Right M&A Advisor →
What if I received an unsolicited offer?
Don't say yes or no yet. An unsolicited offer is a data point, not a deadline. Get an independent valuation first, then decide whether to engage, ideally with competitive tension from other buyers.
Read: What to Do If You Receive an Unsolicited Offer →
Is now a good time to sell?
Market conditions in 2026 are strong for quality businesses: PE dry powder is at record levels, strategic buyers are active, and interest rates have stabilized. But timing should be driven by your business's readiness, not the market. A well-prepared business sells well in any market.
Want a real number?
Get a free, confidential business valuation. We'll normalize your earnings, assess your buyer landscape, and give you a defensible range, whether you're selling in 6 months or planning 2 years out.