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How to Know When You’re Ready to Sell Your Business
Selling your business is not a single decision — it’s the outcome of many decisions made over time
What Is My Business Worth?
The real answer to what your business is worth — and the factors that move it higher or lower. From an advisor's perspective, not a textbook.
Get a Free Valuation
Or try our Business Valuation Calculator for an instant estimate.
What's in This Guide
Why 'What Is My Business Worth?' Is the Wrong First Question
You've probably thought about selling your business for a while. Maybe it's been in the back of your mind for years, or maybe something changed recently — a health scare, a shifting market, a partner who wants out. Whatever brought you here, the decision to sell is one of the biggest you'll ever make.
Here's the hard truth most advisors won't tell you upfront: the majority of businesses listed for sale never actually close a deal. Not because they're bad businesses, but because the owners weren't prepared, priced the business wrong, or chose the wrong advisor.
70% of business owners
have no idea what their company is worth. Of those who do, most overestimate by 50–100%.
Based on general M&A industry survey trends.
This guide is designed to change that for you. It covers the entire process from start to finish — not in theory, but based on how deals actually get done in the lower middle market (businesses between $750K and $10M in revenue). We'll walk through valuation, preparation, finding buyers, deal structure, and what happens after closing.
If you're wondering where you stand right now, our Exit Readiness Assessment takes about five minutes and will show you how prepared your business is for a successful sale.
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The Math: How Business Valuation Actually Works
Every business owner has a number in their head — what they think their company is worth. In almost every case, that number is wrong. Not because you don't know your business, but because valuation in M&A follows a different logic than the one you use to run your company.
Business valuation in the lower middle market typically comes down to a multiple of earnings. The question is: which earnings metric, and which multiple?
SDE vs. EBITDA: The Two Metrics That Matter
SDE
Seller's Discretionary Earnings
Your net profit plus owner compensation, plus any personal or one-time expenses running through the business.
Best For: Owner-operated businesses under $2-3M revenue
EBITDA
Earnings Before Interest, Taxes, Depreciation & Amortization
Assumes professional management is in place and the owner is replaceable.
Best For: Professionally managed businesses with larger revenue
Sample SDE Calculation
Net Profit
$455,000
+ Owner Salary & Benefits
$150,000
+ Personal Vehicle Expense
$12,000
+ One-Time Legal Fee
$8,000
+ Depreciation & Amortization
$18,000
+ Interest Expense
$6,500
= Seller's Discretionary Earnings
$649,500
Typical Valuation Range (2.5x - 3.5x SDE)
$1,623,750
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$2,273,250
What Drives the Multiple?
Distressed / Commodity
Typical
Premium / Recurring
2.0x
3.0x
4.0x+
SDE Multiples (owner-operated businesses)
Lower Performance
Typical
High Growth
3.5x
5.0x
7.0x+
EBITDA Multiples (professionally managed businesses)
Three Valuation Approaches
Market Approach
Compares your business to similar businesses that have recently sold, using multiples from comparable transactions.
Best For: Established businesses in active markets
Income Approach
Projects future cash flows and discounts them to present value based on risk and expected returns.
Best For: Predictable, stable cash flows
Asset Approach
Compares your business to similar businesses that have recently sold, using multiples from comparable transactions.
Best For: Asset-heavy or distressed businesses
Professional Valuation vs. DIY: When You Need an Expert
Feature
Cost
Time to Complete
Accuracy
Best Use Case
Customization
Online Calculators
Free to $500
5-15 minutes
Estimated range
Initial curiosity, planning
Generic industry multiples
Professional Opinion of Value
$2,500 - $10,000+
2-4 weeks
Detailed, defendable valuation
Serious sale, SBA financing, disputes
Business-specific adjustments
See What Your Business Could Be Worth
Our free Business Valuation Calculator uses real market data to estimate your range.
What Moves the Needle: The Five Factors Buyers Pay For
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Revenue Quality & Predictability
Recurring revenue, long-term contracts, and predictable sales cycles command premium multiples. One-off project revenue is worth less.
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Customer Concentration
If your top 3 customers represent more than 30% of revenue, buyers will discount heavily. Diversified customer bases reduce risk.
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Owner Dependence
Can the business run without you? If you're the rainmaker, technician, or key relationship, expect lower multiples or earnouts.
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Growth Trajectory
Consistent 15-20%+ annual growth in a stable market can add 0.5-1.0x to your multiple. Declining revenue kills deals.
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Industry & Market Position
Hot industries (SaaS, healthcare IT) command premiums. Commoditized services (general contracting) get lower multiples.
Common Valuation Mistakes That Cost Sellers Money
Overvaluing Based on Gross Revenue
Buyers don't care about revenue. They care about profit. A $5M revenue business with $200K profit is worth far less than a $2M revenue business with $500K profit.
Ignoring Add-Backs
Failing to properly document owner perks, one-time expenses, and above-market salaries leaves money on the table.
Using Peak Year Performance
Buyers discount one-time spikes. They want 3-year trends. A single great year won't carry weight if the others are flat.
Assuming Your Industry Multiple Applies
Just because you read that SaaS companies sell for 6x doesn't mean your SaaS company will. Quality matters more than category.
Not Accounting for Working Capital
Buyers expect you to leave enough working capital to operate the business. Draining cash before closing reduces your net proceeds.
Comparing to Public Company Multiples
Public companies trade at 2-3x the multiples of small private businesses due to liquidity, scale, and governance. Don't use them as benchmarks.
From Valuation to Action: Your Next Steps
Get Your Number
Use our calculator or request a professional valuation to understand your baseline.
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Improve What Matters
Focus on the five factors buyers pay for. Small changes can add significant value.
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Go to Market
When you're ready, partner with an experienced advisor who knows your market.
Ready to Understand What Your Business Is Really Worth?
Get a free valuation estimate in minutes, or schedule a consultation with our team.
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Why Traditional Business Brokerage Often Falls Short for Good Business Owners
Traditional brokerage models were built for volume — not for precision, preparation, or high value outcomes.
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