What is my business worth? The four numbers that answer it
Joan asked what her hardware store was worth and got four different answers. Each one was right about something. Here is how they fit together, from the floor to what lands in the bank.
By The YourBizWorth team · 9 min read
What is my business worth? Joan Pruitt asked it out loud one morning in aisle four, with a box of wood screws in her hands and nobody there to answer.
Joan is 64. She runs Pruitt Hardware in Maple Fork, the store her father opened. Two full-time clerks, a part-timer named Eli who cuts keys after school, and a delivery truck older than Eli.
Over one month she heard four answers, and each one was right about something. This issue lays them side by side. Joan, Eli, the store and Maple Fork are made up. The method is the one buyers and their lenders use.
Chapter 1
Four answers to one question
Example only, with made-up numbers. Her nephew said the stock and the shelves, maybe $62,000. Her accountant said it depends on earnings. A friend at church said a store like hers should bring $450,000.
Then a banker she knew asked a different question: what could a buyer borrow against it? Joan went home with four numbers and no idea which one was the real one.
35%of owners do not know what their business is worth, and only 14% have had a professional valuation (BizBuySell, Q2 2026, via Small Business Trends)
Each of these is a fair answer to what is my business worth, asked from a different chair. The trouble starts when an owner mixes them up, like hoping for a price no loan can carry.
If you want a rough range for your own business before reading on, the free business value calculator takes your trade and two numbers from your return and gives you one in about a minute.
The floor
What the business brings if you close it and sell what is inside. The least it is worth, and the number to beat.
The buyer's price
What someone pays to own the earnings. Most small businesses are priced as a multiple of what they pay their owner each year.
The loan's limit
The most a buyer can borrow and still pay it back from the business. A price above it rarely gets financed.
The take-home
What reaches your bank account after the sale's costs and taxes. The number you actually plan your next years with.
Chapter 2
The buyer's price starts on the tax return
Joan took the accountant's answer first. She pulled three years of returns into the back office. Last year's profit line said $58,000 on about $820,000 in sales.
Her accountant explained that a return is built to lower taxes. Some of the costs on it were really Joan's pay, or her personal costs, or bills the store paid once.
This number is called seller's discretionary earnings, or SDE. It is what one owner who runs the business full time takes home in a year. Buyers multiply it to set a price.
Joan ran the same lines for the two years before. They were close, a little lower each year back. A steady or rising trend is what a buyer hopes to see.
Joan's made-up store, last year's return, worked into owner earnings (SDE).
Line
Amount
Why it is added back
Profit on the return
$58,000
The starting point
Joan's own wages
$50,000
A buyer who runs the store gets this pay
Depreciation on shelving and the truck
$7,000
A tax deduction, not cash spent this year
Interest on the truck loan
$3,000
The buyer brings their own financing
Joan's car and phone
$4,000
Personal costs the store pays for
New register system, set up once
$4,000
A one-time cost, not a yearly one
Owner earnings (SDE)
$126,000
$68,000 more than the profit line
Worked example with made-up figures. Only add back what you can show on paper. Clerks' wages, rent and the cost of the stock stay as costs, because a buyer pays them too.
Chapter 3
The range, and the loan that has to fit inside it
With $126,000 in owner earnings, Joan looked up what retail stores actually sold for. Closed sales, not asking prices, because an asking price is only what a seller hopes for.
Then Joan took the banker's question. Most buyers of a store this size borrow, often with an SBA loan. The loan payment comes out of the same earnings, after the buyer pays themselves enough to live on.
For a loan that buys a whole business, SBA rules have the buyer put in at least 10% of the project cost. Here is the made-up check at two prices, with the other 90% borrowed at an example 10% over 10 years.
Three ways to read Joan's made-up $126,000 in owner earnings and $820,000 in sales.
Yardstick
Multiple
What it gives Joan
Retail shops, closed sales
1.8x to 3x SDE
$227,000 to $378,000
All deals under $500,000, median
2.0x SDE
$252,000
Cross-check on sales
0.3x to 0.6x revenue
$246,000 to $492,000
Sources: BizBuySell industry multiples (closed sales), IBBA and M&A Source Market Pulse Q4 2025. Worked example, not a valuation.
At $250,000
About $35,700 a year in loan payments. The store's $126,000, less $60,000 for the buyer to live on, leaves $66,000. The payment fits with room for a slow winter.
At $450,000
About $64,200 a year in loan payments, against the same $66,000. One bad month and the buyer misses a payment. A lender is unlikely to approve it.
What the check tells you
Below a certain price, a buyer can borrow and still sleep at night. Above it, the deal needs a buyer with a lot of cash, or the seller carrying part of the price.
Chapter 4
The floor, the take-home, and where Joan landed
Joan's nephew was right too, in his way. If she closed, a closing-out sale of the stock might bring $48,000, and the shelving, truck and key machine $14,000. That is $62,000, before the costs of closing.
It was the floor, and it showed her what selling was worth. A buyer's price near $250,000 was roughly four times what closing would bring. Eli and the clerks would keep their jobs, too.
She placed the store honestly. Steady regulars and a long lease pulled it up. She still did all the ordering herself, which pulled it down. She settled near $250,000, close to the 2.0x median, a price a buyer's loan could carry.
"I had four numbers and thought three of them were wrong. They were all right. They just answered different questions."
Then the last number, the take-home. With a broker at 10%, a fee inside the 8% to 12% range one brokerage describes, Joan would have about $220,000 before taxes. A broker finds and screens buyers and runs the deal, and that fee pays for real work.
Listing it herself for three months at $697 a month would cost $2,091, leaving about $242,909 before taxes. Then Joan does the screening and the follow-up herself. Either way, taxes come out next, and her accountant estimates those.
Ask early whether a price includes the stock on the shelves. Deals handle inventory in different ways, and the answer should be written into the agreement by your own attorney.
$220,000 Before taxes, to Joan
$25,000 Broker fee at 10%
$5,000 Attorney
Where a made-up $250,000 sale goes if a broker runs it, before taxes
One eveningThree years of returns, the profit line, and every add-back written down with the line it came from.
The same weekThe range from closed sales in your trade, and the loan check at the price you hope for.
Before you decideThe floor if you closed, and the take-home after fees and an attorney. Ask your accountant about taxes.
The next yearFix what pulls the number down. For Joan, teaching a clerk to do the ordering.
What to do instead
Know the floor firstWrite down what closing would bring: stock sold off, equipment sold used, minus the costs of closing. Any sale above it is money closing leaves behind. Before you close, find out who would buy it
Price on earnings, then check the loanWork out owner earnings (SDE) from the return and multiply by the range for your trade. Then check that a buyer's loan payment fits inside those earnings. Start with the free calculator
Plan with the take-home, not the priceSubtract the broker or listing fee, the attorney and taxes. That is the number your retirement or next venture actually runs on. Broker fee calculator
Sources
Small Business Trends, Small Business Acquisitions Drop 10% as Buyers Get More SelectivePublished August 11, 2026, reporting BizBuySell's Q2 2026 Insight Report; checked October 18, 2026 · BizBuySell survey of owners, buyers and brokers; sample size not stated in the articleReports that 35% of owners do not know what their business is worth and only 14% have completed a professional valuation. Also reports median time on market of 155 days for service businesses and 247 days for manufacturing in Q2 2026. A news summary of BizBuySell's figures, not the report itself.
BizBuySell, Business Valuation Multiples by IndustryBusinesses sold Q3 2021 through Q2 2026, updated biannually · Aggregated closed sales reported to BizBuySell over a trailing five-year periodFigures are averages of closed sales reported to one marketplace, US only. A marketplace sees the deals listed on it, not every sale in the country.
IBBA and M&A Source, Market Pulse Report, Q4 2025 (55th edition)Q4 2025, fielded January 1-15, 2026 · 350 brokers and advisors, 330 completed transactionsMedian SDE multiples by deal size: under $500K sells at 2.0x, $500K-$1M at 3.0x, $1M-$2M at 4.1x. Independent of marketplace data, which is why it is worth citing alongside.
US Small Business Administration, SOP 50 10: Lender and Development Company Loan ProgramsVersion 8 effective June 1, 2025; version 8.1 effective October 1, 2026For a 7(a) loan that funds a complete change of ownership, the buyer must inject at least 10% of total project cost. A seller note can count toward up to half of that only if it is on full standby (no payments) for the life of the SBA loan. SBA revises this SOP; confirm the current rule with the lender.
Morgan & Westfield, Business Broker and M&A Advisor Fees: A Comprehensive GuideChecked October 2026 (page undated) · None. This is a brokerage firm describing market practice, not a dataset.States that most brokers charge a flat 8% to 12% commission on businesses under $1 million and a minimum fee of $10,000 to $25,000 regardless of sale price. Commissions are negotiated privately and individual agreements vary.
Barnes Walker, How Much Does a Lawyer Charge to Sell a Business?Published April 2026, checked October 18, 2026 · None. One Florida law firm describing its market, not a fee survey.States that attorney fees for selling a business in Florida typically run $3,000 to $15,000 or more, with flat fees of $3,000 to $10,000 for simple asset sales under $500,000 with standard terms, and hourly rates of $250 to $450. One state and one firm; fees elsewhere differ, so get local quotes.
YourBizWorth is not a broker, appraiser, or law firm. This column is general information, not legal, tax, or lending advice.
Questions people ask
What is my business worth, in one sentence?
For most small businesses, a buyer pays a multiple of the owner's yearly earnings (SDE). IBBA and M&A Source reported a median of 2.0 times SDE on sales under $500,000 at the end of 2025. Your trade, your books and your role move it.
Is my business worth the value of its equipment and stock?
That is the floor, what closing would bring. A business that earns steady money for its owner usually sells for more than its assets, because a buyer is paying for the earnings, not just the things.
Why does a buyer's loan matter to what my business is worth?
Most small business buyers borrow. If the loan payment does not fit inside the earnings after the buyer's own pay, a lender is unlikely to approve it. A price above that line needs a cash buyer or seller financing.
How much of the sale price will I actually keep?
Less than the price. Expect an attorney fee, taxes, and a broker fee or a listing fee. One brokerage says most brokers charge 8% to 12% on businesses under $1 million. Ask your accountant to estimate the taxes before you list.
