It’s the first question every owner asks, and the honest answer is: it depends — on a knowable set of factors. This page explains how buyers and brokers actually value a business, what pushes the number up or down, and how to get a figure you can trust.
Businesses Are Valued on Earnings, Not Revenue
A business doing $2M in revenue might be worth less than one doing $800K. What matters is what the business earns its owner. For owner-operated businesses, buyers look at seller’s discretionary earnings — profit plus the owner’s salary, benefits, and legitimate add-backs. Bigger businesses are usually valued on EBITDA. Either way, buyers apply a multiple to those earnings, and the multiple grows with size, stability, and how transferable the business is: smaller, riskier, more owner-dependent businesses earn lower multiples than larger, systemized ones.
The Factors That Move Your Value
Recurring revenue and contracts push value up; revenue that must be re-won every month pushes it down. Customer concentration cuts both ways — one customer worth a third of revenue is a risk buyers price in. Owner-dependence is the silent discount: if the business stops when you stop, buyers pay less. Clean, verifiable books raise confidence and price. A visible growth trend, transferable leases and licenses, and a team that will stay all add up in your favor.
What Buyers Are Really Paying For
Predictable cash flow at low risk. Every question in due diligence is really the same question: how sure can I be that this money keeps coming after the owner leaves? The more of your business you can prove — with records, contracts, and systems — the surer they are, and the more they’ll pay.
Why Comparable Sales Decide the Number
Ultimately your business is worth what buyers have paid for similar businesses — same industry, similar size, similar market. That comparable-sales data lives with brokers and deal databases, not on public websites, which is why a broker’s valuation from real comps beats any online calculator or rule of thumb. It’s also why industry matters: a broker who has sold businesses like yours knows what yours can actually command.
Getting Your Number
Start by putting your last three years of financials in order. Then talk to a broker with a track record in your industry — the valuation conversation is free with our match, and it comes with a written report explaining which broker we recommend for you and why.
New to the process? Read how selling works start to finish.