Every owner asks “what is my business worth?” — and most are given an answer based on a rule of thumb. The truth is more precise, and more actionable, than a multiple.
The Multiple Is an Output, Not an Input
Professional valuations are built on normalized earnings: typically seller’s discretionary earnings (SDE) for businesses earning up to $2M, and EBITDA for larger or more institutional companies. From normalized earnings, the market applies a multiple — but that multiple is a result of how your business scores on five factors, not a magic number.
The Five Levers of Value
- Recurring revenue. Businesses with contractual, repeat, or subscription revenue routinely transact at 1.5–3x the multiple of project-based businesses with identical earnings.
- Owner independence. If the books, sales, and operations collapse into one person, risk — and value — collapse together. A business that runs without its owner sells for measurably more.
- Concentration. A customer over 15–20% of revenue, or a supplier you cannot replace, is a discount. Diversification is worth paying for before the sale, not after.
- Financial hygiene. Clean, reconciled, documented financials — adjusted for owner perks transparently — remove the buyer’s uncertainty, which is what they’re really paying to remove.
- Growth evidence. Buyers underwrite the future, not the past. Two years of documented growth (price increases, new accounts, market expansion) is worth more than a decade of flat, steady numbers.
What You Can Do Today
The best time to prepare a business for sale is 12–24 months before you intend to sell. Deferred maintenance, customer contracts, documented processes, and a second-in-command are all investments that pay back at exit measured in multiples, not percentages.
Our confidential business assessment covers all five levers and produces a defendable valuation range — at no cost and with no obligation. What you do with it is entirely your choice.
