What is your business worth?
Get a confidential value range built from your real earnings and what buyers are paying for similar businesses. Free, with no obligation to list.
How a main street business is valued
Most owner-operated businesses are valued on a multiple of Seller's Discretionary Earnings (SDE). Larger businesses with a management team in place are usually valued on a multiple of EBITDA. The IBBA Market Pulse survey uses the same split: SDE for deals under about $2 million, EBITDA above that.
Step 1: Find the real earnings (SDE)
SDE starts with net profit before taxes, then adds back:
- One owner's salary and payroll taxes
- Owner benefits run through the business, like health insurance, a vehicle or a phone
- Interest, depreciation and amortization
- Truly one-time expenses, like a lawsuit settlement or a one-time repair
Every add-back needs to be documented. A buyer's lender will check them.
Step 2: Apply a multiple
The multiple is what buyers are paying for each dollar of SDE in businesses like yours. It comes from comparable sales and from the specifics of your business. Two companies with the same earnings can sell for very different prices because of:
- Industry and how in demand it is with buyers
- Size: bigger earnings usually earn a higher multiple
- How much the business depends on you
- Earnings trend over the last few years
- Customer concentration and recurring revenue
- Lease terms, location and condition of equipment
- Whether a buyer can get it financed
Step 3: Check it against the market
We also look at what is included in the sale (inventory, equipment, real estate or not), working capital, and how the deal is likely to be financed. A number a lender will not support is not a real number.
Why not just use an online calculator?
Calculators do not know your add-backs, your lease, your customer mix or how much the business leans on you. They also cannot tell you what to fix. Use them for curiosity, not for a decision this big.
Request your free confidential valuation
Fill this out and you will hear back from Eric directly. Your information stays private.
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Prefer not to use the form? Email eric@mainstreetexits.net or call (877) 450-8756.
Is the valuation really free?
Yes. There is no charge and no obligation to list your business with us.
Is this a certified appraisal?
No. It is a broker's opinion of market value for planning and pricing a sale. If you need a certified appraisal for a lender, estate, divorce or tax purpose, we can point you to a credentialed appraiser.
What will you need from me?
To start, your industry, revenue range and location. For a firm value range, we will ask for recent tax returns and profit and loss statements.