Valuation

How Much Should I Sell My Business For?

Most businesses sell for a multiple of their earnings, often around four times EBITDA for smaller companies. But that is only the starting point. The real number is set by your earnings base, your sector, and the process you run, and in the lower middle market, quality businesses with scale, growth, and recurring revenue command materially higher multiples.

By Jeff Barrington, Managing Director · Windsor Drake · Updated June 2026

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The Short Answer

A multiple of earnings, adjusted for quality.

Small businesses in popular industries typically trade at 2 to 3.2 times earnings, with an average around 2.51, or 2 to 4 times SDE. Larger, lower-middle-market companies are valued on a multiple of adjusted EBITDA and command higher multiples as earnings scale, growth quality, recurring revenue, and a competitive process all push the number up. To understand where your business sits, start with the method that fits it. For the full mechanics, see our guide to business valuation methods for private companies.

Valuation Methods

Three ways buyers price a business.

Income-based

Values the business on its earnings, a multiple of profit, a discounted cash flow (DCF) that discounts future cash flows to today, or capitalization of earnings (expected annual earnings divided by a capitalization rate). Best for businesses with predictable profits.

Market-based

Compares your business to similar companies that sold recently in your industry and region. If comparable companies sold for around three times their annual earnings, that becomes a benchmark.

Asset-based

Adds up assets and subtracts liabilities: Business Value = Total Assets − Total Liabilities. Useful for asset-heavy businesses, a poor fit for service companies whose value lives in earnings.

The Metrics That Matter

EBITDA, SDE, and revenue.

EBITDA

Earnings before interest, taxes, depreciation, and amortization, the standard base for larger, established businesses. Buyers value adjusted EBITDA, normalized for owner add-backs and one-time items.

Seller’s discretionary earnings (SDE)

Net profit plus the owner’s salary and perks. The standard base for small, owner-operated businesses, which typically trade at 2 to 4 times SDE.

Revenue and recurring streams

Multiple, steady revenue streams and recurring contracts reduce risk and lift price. High-growth software is often valued on revenue rather than earnings.

Industry Multiples

Multiples vary widely by sector.

Technology and healthcare command premiums; retail and restaurants sit lower. Hot deal markets and abundant capital push multiples up, while higher rates and tighter credit push them down. These are benchmarks, not ceilings.

Typical EBITDA multiple by industry (smaller businesses)
Industry	Typical EBITDA multiple
Technology	3.0 – 6.0
Healthcare	2.5 – 4.0
Manufacturing	2.5 – 3.5
Retail	2.0 – 2.8
Restaurants	1.5 – 2.5

Before You Go to Market

Preparation sets the number.

Organize your financials

Have at least two years of profit-and-loss statements, balance sheets, cash-flow statements, and tax returns, reconciled and backed by source documents.

Disclose debt fully

Buyers price what they can see. Document all short- and long-term debt; surprises in diligence cost value.

Reduce owner dependence

A business that runs without the owner is worth more. Build a management layer and document processes.

Improve before you market

Operational improvements, margin, concentration, recurring revenue, made before a sale raise both earnings and the multiple.

Brokers and advisors. Business brokers price, market confidentially, screen buyers, and manage negotiations, typically charging 5% to 12% of the sale price, with a minimum commission of $10,000 to $15,000 for smaller businesses. For larger companies, an M&A advisor runs a competitive process; the difference between a broker and an M&A advisor matters most above roughly $5M in value. Know what buyers look for before you start.

Frequently Asked Questions

Pricing your business for sale.

What factors matter most when valuing a business?

Annual profit and expenses, growth trends, the industry-standard multiple, company age, customer loyalty and concentration, the value of assets and intellectual property, and overall market conditions. Buyers look at multi-year trends, not a single year.

How does revenue affect the sale price?

Higher and steadier revenue generally supports a higher price because it signals more durable earnings. Sharp swings or declining sales lower value; consistent growth raises it. Buyers examine several years of trend, not one snapshot.

What are the most common valuation methods?

Multiples of earnings, discounted cash flow, and asset-based valuation. Many small businesses are priced at 2 to 4 times SDE; larger or more complex companies use a blend of methods or a professional appraisal.

How are online businesses valued differently?

Online businesses are valued on traffic, digital revenue, scalability, subscription models, and digital assets, while brick-and-mortar businesses lean more on physical assets, local competition, and foot traffic.

Should I use a business valuation calculator?

A calculator gives a fast ballpark from your profit, expenses, debt, and growth rate, useful for early planning, but it is not a substitute for professional advice when the outcome is a real transaction.

Which financial indicators most affect price?

Profit margins, total revenue, growth rate, cash flow, outstanding debt, earnings stability, customer concentration, efficiency, and recurring revenue.

Confidential Inquiry

Find out what your business is really worth.

A calculator gives a ballpark; a competitive process sets the real number. Windsor Drake advises founder-led companies with $5M–$150M+ in enterprise value on sell-side transactions, partner-led from first meeting to close.

Request a Confidential Valuation

All inquiries are treated as confidential. Windsor Drake operates from offices in Toronto and New York.