Most small businesses sell for a multiple of their earnings, usually in the low single digits of seller's discretionary earnings (SDE), which is your profit plus what the business pays you in salary, benefits, and personal expenses. Revenue is a weak guide, because two businesses at the same revenue can sell for very different amounts. The real number comes down to a handful of drivers you can name, and to one thing most guides skip: the price a buyer pays and the money you actually keep are not the same figure. This page covers all three.
How a small business is actually priced
Buyers pay a multiple of earnings, not of revenue. For an owner-operated business, the earnings figure that matters is SDE: net profit with the owner's pay, benefits, and one-off or personal expenses added back, so a buyer can see what the business would put in their pocket.
Owner-operated small businesses commonly trade in the low single digits of SDE. Asset-light service businesses and those with recurring or contracted revenue sit toward the top of that range; volatile or heavily owner-dependent businesses sit lower. As a directional example, a business with $200,000 of SDE priced at 2.5 to 3.5 times would sell for roughly $500,000 to $700,000. Where you land inside that spread is not random. It is the drivers below.
Revenue rules of thumb ("a business sells for about one times sales") mislead because they ignore margins and owner dependence entirely. Two shops at $1 million in sales can carry very different profit and transferability, and the buyer is paying for the profit that transfers. Larger businesses are usually priced on EBITDA, calculated after paying a manager to run the place, which is a smaller earnings base than the SDE an owner-operator thinks in. That difference is why a "5 times EBITDA" headline and a "3 times SDE" quote can describe the same business. Our rules of thumb by industry page lists the common multiples if you want a quick bracket.
What moves your number up or down
The single largest factor is how much the business depends on you. A buyer cannot buy you, so the more the business runs without the owner, the higher the multiple. After that, the drivers that move you within the range are the ones a buyer can verify:
- Recurring or contracted revenue, rather than starting from zero each month
- Stable margins that hold up year to year
- A diversified customer base, rather than one or two accounts that carry the business
- Clean, current financial records a buyer can trust
- Documented systems a new owner can follow without you
- A genuine growth trend
- A management layer that stays after the sale
None of these is visible in a revenue figure, which is why the number a calculator hands you is a starting bracket, not your answer. The work of raising your price is the work of improving these drivers, and most of them also make the business better to own in the meantime.
The number you sell for vs. the number you keep
This is where most guides stop, and it is the number that matters most to you. A headline sale price is not cash in your hand. Plan for the net.
A broker, if you use one, typically takes around 10% of the sale price. Any business debt, loans or lines of credit, comes off the top at closing. The sale is taxed, and how the deal is structured changes the tax you owe, so proceeds are not tax-free. And the structure itself matters as much as the price: cash at close is not the same as seller financing, where you are paid over years, or an earnout, where part of the price is paid later and only if the business hits agreed targets. The same "$700,000" can mean very different real outcomes.
A quick net-proceeds sketch. A $700,000 headline price, with a 10% broker fee and a $100,000 loan to pay off, is already down to about $530,000 before tax. If a chunk of that sits in an earnout, the cash you receive at close is lower still.
Knowing this before you list changes what you negotiate for, because you start optimizing for what you keep, not for the biggest number on the page. If you would rather skip the commission, see how to sell without a broker.
Asking price, sale price, and why calculators only get you close
Your asking price is a starting position. The sale price is what a buyer will actually pay, and the two rarely match. Online calculators and rules of thumb give you a rough bracket, not your number, because they cannot see your owner-dependence, your customer concentration, or the state of your records. Overpricing stalls a sale and scares off qualified buyers; underpricing leaves money on the table. The point of a sound first number is to negotiate from fact instead of hope.
See what your business would sell for. Our calculator gives you a grounded first number from your own earnings in a couple of minutes, with no broker and no email wall.
What this means for you right now
You do not need to be selling this year for this to be worth knowing. Whether you plan to exit soon, in five years, or not at all, your business is likely your largest asset, and knowing its number tells you three things: what that asset is worth today, which drivers to work on to raise it, and whether any offer that comes your way is fair.
You also do not need to hire anyone to get a sound first read. Deciding whether to sell at all is a separate question worth its own thinking, and running the sale yourself, without paying a broker 10%, is a real option for many owners. Either way, the starting point is the same: know what your business is worth before anyone else tells you.
The fastest way to that number is to run your earnings through the calculator, then get the full picture of how a business like yours is valued.