What is my business worth? How buyers actually price a main street business
Owners usually come to us with one of three numbers in their head: what they need to retire, what a competitor supposedly sold for, or what an online calculator said. None of those is what a buyer will pay. Here is how buyers and their lenders actually get to a price.
It starts with earnings, not revenue
Revenue tells a buyer how big the business is. Earnings tell them what they can afford to pay. For most owner-operated businesses, the earnings figure is Seller's Discretionary Earnings (SDE): the total financial benefit one full-time owner gets from the business.
How SDE is calculated
Start with pre-tax net profit, then add back:
- The owner's salary and payroll taxes (one owner)
- Owner perks paid by the business: health insurance, vehicle, phone, personal travel
- Interest, depreciation and amortization
- Truly one-time expenses
A simple example with made-up numbers: a business shows $120,000 in net profit. The owner pays herself $80,000, runs $12,000 of vehicle and insurance costs through the business, and has $18,000 of depreciation. SDE is $230,000. That is the figure a buyer works from, not the $120,000 on the tax return.
The catch: every add-back has to be backed up. If you cannot document it, a buyer's lender will not count it.
Then a multiple is applied
Price is roughly SDE times a multiple. The multiple reflects risk and demand: how confident a buyer is that the earnings will continue under new ownership, and how many buyers want this kind of business. Larger businesses with a management team are usually priced on EBITDA instead of SDE, typically at higher multiples.
Why two businesses with the same profit sell for different prices
| Pushes the multiple up | Pushes it down |
|---|---|
| Runs without the owner | Owner is the business |
| Growing earnings | Flat or declining earnings |
| Many customers, recurring revenue | A few big customers, one-off jobs |
| Clean books that match tax returns | Cash not recorded, messy add-backs |
| Long lease, good location | Short lease, uncertain renewal |
| Stable, trained team | Key people likely to leave |
| Easy to finance | Hard for a lender to underwrite |
Owner dependence is one of the biggest of these. I went deeper on it in Owner-dependent businesses sell for far less.
What the market looks like right now
BizBuySell reported a median sale price of $350,000 for businesses sold in Q3 2026, up 17% from a year earlier, though it noted part of that rise reflects a larger share of higher-value businesses selling (source). Medians are interesting, but your price depends on your earnings and your risk profile, not the average.
Financing sets a ceiling
Many main street buyers use bank or SBA financing. If a lender's valuation does not support the price, the deal either gets renegotiated or needs more cash or seller financing to close. That is why a realistic number up front saves time and heartache.
What is included matters too
Is inventory in the price or on top? Is real estate included? Is the buyer getting working capital? Are you selling assets or the company itself? Each of these changes what the headline number really means.
How to get a number you can trust
Use calculators for curiosity. For a real decision, get a valuation based on your actual recast financials and current comparable sales, from someone who will show you the math. Ours is free and confidential.