What Is My Business Actually Worth? (and Why Every Valuation Disagrees)

There is no true price

Start with the fact every broker knows and few say out loud: your business does not have one correct value. It is worth what a specific buyer, with a specific lender, is willing to pay on a specific day — and until that day, the honest answer is a range, not a number. What a serious valuation can do is describe that range: what similar businesses have actually sold for, and how far yours sits from the ones that were measured.

That is why a valuation you can trust reports a range over a point estimate. A single number sounds authoritative, but it hides the spread that is the real information — two businesses that both get quoted “$400,000” can have very different odds of actually selling near that figure.

The formula, unpacked

Every valuation on this site, and most brokers’ back-of-envelope math, reduces to one equation: estimated sale price = SDE × industry multiple. Both terms have a real source behind them, and both are worth understanding on their own before you trust the number they produce together.

SDE — what the business actually pays its owner

Seller’s Discretionary Earnings is the standard earnings figure for owner-operated businesses, defined by the International Business Brokers Association’s glossary: pre-tax profit, plus one owner’s entire compensation, interest, depreciation and amortization, and any one-time or personal expenses the business paid. It answers the question a buyer actually asks — “what does this business put in an owner-operator’s pocket in a normal year?” — rather than the accounting profit a business with hired management would report.

Two rules do the most work in an honest SDE calculation. First, only one full-time owner’s compensation gets added back — a second working owner is restated at what it would cost to hire their replacement, not added back in full. Second, normalization runs both directions: it subtracts as often as it adds. Below-market rent to a related landlord, unpaid family labor, one-time income that won’t repeat — all reduce SDE, because a buyer will face those real costs. A worksheet that only ever adds numbers up is a sales pitch, not a valuation input.

The multiple — priced against real sales, not a rule of thumb

The multiple converts SDE into a sale price. Ours is transcribed from BizBuySell’s Business Valuation Multiples by Industry, which aggregates reported sales over a trailing five-year window — currently businesses sold Q3 2021 – Q2 2026, updated biannually. 80% of businesses in the source data set sold between $50,000 and $2,000,000 — the “main street” segment. A multiple built this way is an average of what buyers actually paid for similar businesses, not an invented industry rule of thumb — and it's worth asking any other valuation you're handed where its multiple came from.

What moves the multiple: the qualitative factors

The base multiple is an industry average; every individual business sits above or below it depending on factors a broker would actually assess in diligence: how the business runs without you, years under current ownership, revenue trend over the last 3 years, financial records, premises & lease, customer base. On this site those adjustments are shown as named, priced line items — not folded invisibly into a single “gut” multiple — so you can see exactly which factor moved your number and by how much, and discount any you disagree with.

A business run entirely by its owner, with a short-term lease and one customer accounting for 40% of revenue, is not the same asset as an otherwise-identical business with a manager in place, a long lease, and diversified customers — even though both might report the same SDE. The adjustment factors are how that difference gets priced instead of ignored.

What a multiple-based estimate leaves out

• Inventory and real estate. Sold-business multiples generally price the operating business itself; saleable inventory and any owned real estate are typically negotiated on top of, or separately from, this number.
• Deal structure and financing. SBA financing terms, a seller note, or an earnout all move the price a seller actually nets, even when the headline sale price is identical.
• Local market conditions. Published multiples are national averages. A strong regional market for buyers, or a glut of similar businesses for sale locally, isn’t reflected in a national figure.
• Business size and earnings method. SDE is the right lens for owner-operated Main Street businesses. Once a business is large enough to run on hired management, buyers typically price it on EBITDA instead — a different multiple scale entirely (see our SDE vs. EBITDA calculator).

How to sanity-check any valuation — including this one

Whether you’re reading this site’s estimate, a broker’s opinion of value, or a formal appraisal, the same three questions separate a defensible number from an asserted one:

• What earnings figure was used? SDE, EBITDA, and gross revenue multiples aren’t interchangeable — a multiple quoted against the wrong earnings base produces a meaningless price.
• What backs the multiple? A specific, dated, citable data source beats “industry standard is 3×” every time. Ask to see it.
• Are the adjustments named, or hidden? A number that moved from the industry average without a stated reason is a guess wearing a valuation’s clothing. Every adjustment should be traceable to a specific, nameable factor.

Run your own numbers through the SDE Business Valuation Calculator below to see all three parts — earnings, multiple, and named adjustments — on one page, priced in the open.

This guide is for informational purposes only. It is not financial, legal, or business-brokerage advice, and it is not a formal valuation or appraisal. What a business actually sells for is set by a specific buyer, a specific lender, and a specific deal — no article or calculator can know that in advance, and we say so instead of pretending otherwise.

Last reviewed: July 2026 · Against the IBBA glossary and BizBuySell's published valuation-multiples report cited throughout.