What’s My Small Business Worth? The 5 Numbers Buyers Actually Look At
Owners often start with a number in mind, usually what they need, not what a buyer sees. Buyers look at a short list of numbers, and understanding them tells you exactly where your value stands and what would move it.
1. Earnings, the anchor
Most small-business prices start with a multiple of earnings: seller's discretionary earnings (SDE) for owner-operated businesses, EBITDA for larger ones. Everything else on this list moves the multiple up or down.
2. Revenue, and its quality
A dollar of recurring, contracted revenue is worth more than a dollar of one-off project revenue. Buyers pay for revenue they can count on after you leave.
3. Customer concentration
If one customer is a large share of sales, a buyer sees a business that can lose that share in one phone call, and prices that risk in. Diversifying your top accounts is one of the highest-leverage value moves an owner can make.
4. Owner dependence
Ask the hard question: if you took three months off, what breaks? The more the answer is "everything," the more the buyer is purchasing a job rather than a business, and jobs sell at a discount.
5. The trend line
Three years of growth and a rising margin tell a very different story than the same average earnings on a decline. Buyers buy the future; the trailing trend is their best evidence of it.
Curious what your business might be worth?
Run six quick numbers through our free valuation calculator for an educational estimate, or book a free call and talk it through with a fiduciary advisor.
This article is provided for educational purposes only and is not investment, legal, or tax advice, nor an offer of advisory services. Every business and situation is different, consult your financial, legal, and tax professionals about your specific circumstances. Pacific Point Wealth Management, LLC is a registered investment adviser.
Common Questions
What multiple do small businesses sell for?
Multiples vary substantially by industry, size, and risk profile, there is no single number. An educational estimate (like our free calculator) plus a conversation about your specific business is the honest starting point.
Is revenue or profit more important to a buyer?
Profit, specifically verifiable, transferable earnings. Revenue matters mostly as evidence of the earnings’ durability and growth.