By Natalie Kessler
If you’ve built a business from the ground up — a restaurant, a landscaping company, a retail shop, a service business — you probably have a number in your head. Maybe it’s what you think you deserve after years of hard work. Maybe it’s what your neighbor got when he sold his shop down the street. The truth is, business valuation is more science than gut feeling, and understanding how buyers think about value can make a significant difference when the time comes to sell.
It Starts With Earnings, Not Revenue
One of the most common misconceptions among small business owners is that revenue drives value. Buyers don’t buy revenue — they buy profit. The number that matters most is called **Seller’s Discretionary Earnings (SDE)**: your net profit plus your own salary, benefits, and any personal expenses you’ve run through the business. This figure represents the total financial benefit a new owner-operator would receive in your shoes.
For most Main Street businesses, value is expressed as a multiple of SDE. A business generating $150,000 in SDE might sell for 2 to 3 times that amount — somewhere between $300,000 and $450,000. The multiple depends on a range of factors that buyers weigh carefully.
What Pushes the Multiple Up or Down
Not all businesses earning the same profit are worth the same price. Buyers pay a premium for businesses that feel stable and transferable. Here’s what moves the needle:
**Things that increase value:** consistent revenue year over year, a loyal and diverse customer base, a strong team that isn’t dependent on the owner, documented processes, and a long-term lease in a good location.
**Things that decrease value:** revenue concentrated in just one or two customers, books that are difficult to verify, heavy owner involvement in day-to-day operations, aging equipment, or declining trends in the financials.
A buyer is essentially asking: *If I write this check, will the business keep running without you?* The more confidently you can answer yes, the more your business is worth.
What Buyers Actually See
Here’s something most owners don’t realize until they’re in the process: buyers will ask for three years of tax returns and financial statements. Not just the current year. They’ll look for trends, inconsistencies, and anything that feels uncertain. Clean, consistent financials aren’t just good accounting — they’re a valuation tool.
The Bottom Line
Valuation isn’t a single number — it’s a range, shaped by your earnings, your business’s stability, and current market conditions. Our office can provide a formal opinion of value at no cost, giving you a realistic picture of where you stand today and what steps might increase that number before you go to market.
Whether you’re planning to sell next year or in a decade, knowing what your business is worth is simply good business.
