How do I value a small business?

Most small businesses are valued as a multiple of seller's discretionary earnings (SDE): the owner's salary plus profit plus the personal and one-time expenses the business pays for. Main-street businesses typically sell for 1.3 to 3.1 times SDE depending on the industry, and the IBBA's broker survey puts the median for deals under $500,000 at 2.0 times.

How to Value a Small Business: SDE Multiples, Sourced

Typical multiples by industry

Typical sale-price multiples for US main-street businesses.
Business type	Times SDE	Times revenue
Hair salon / Barbershop	1.5x to 2.5x	0.35x to 0.65x
Cleaning service	1.8x to 2.8x	0.5x to 0.9x
Landscaping / Lawn care	1.8x to 2.8x	0.45x to 0.85x
Restaurant / Cafe	1.3x to 2.2x	0.25x to 0.45x
Auto repair / Detailing	1.9x to 3.1x	0.4x to 0.75x
Retail shop	1.8x to 3x	0.3x to 0.6x
Other service business	1.5x to 2.5x	0.35x to 0.7x

Source: BizBuySell, Business Valuation Multiples by Industry (closed sales). Full table and online businesses on the valuation data page.

Bigger businesses earn bigger multiples

BizBuySell's Q1 2026 Insight Report, covering 2,345 closed sales, put the average cash flow multiple across all industries at 2.7 times, with a median sale price of $350,000 on median cash flow of $165,256.

Median SDE multiple by deal size, IBBA and M&A Source Market Pulse, Q4 2025.
Sale price	Median multiple of SDE
Under $500,000	2.0x
$500,000 to $1 million	3.0x
$1 million to $2 million	4.1x

Source: IBBA and M&A Source, Market Pulse Report Q4 2025 (350 brokers, 330 completed transactions).

How to value a small business, step by step

Gather three years of business tax returns. They are what a buyer's lender will use, and three years shows a trend instead of one year.
Calculate SDE. Start with net profit. Add back the owner's salary, owner perks the business pays for (vehicle, phone, health insurance), family on payroll who do not work there, interest, depreciation, and one-time costs.
Pick the industry multiple. Use a range from closed sales for your type of business, not asking prices. Asking prices run higher than what buyers pay.
Place the business in the range. Higher for recurring customers, a stable team, a transferable lease, and an owner the business can do without. Lower for owner dependence, one big customer, or messy books.
Cross-check with a revenue multiple. If the two methods disagree badly, recheck the add-backs.
Document it. Write down every add-back with the tax return line it comes from. A number a buyer can verify holds up in negotiation.

Sources

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.
BizBuySell, Q1 2026 Insight ReportQ1 2026 · 2,345 closed transactions, $2B enterprise valueMedian sale price $350,000 on median cash flow of $165,256. Average cash flow multiple 2.7x across all industries.

YourBizWorth is not a broker, appraiser, or law firm. This guide is general information, not legal, tax, or lending advice.

Questions people ask

What is the difference between SDE and EBITDA?

SDE adds back one owner's full salary and perks; EBITDA does not, because it assumes a paid manager runs the business. Owner-run main-street businesses are usually priced on SDE, larger ones with management teams on EBITDA.

Should I value my business on revenue or profit?

On true earnings (SDE) whenever you can work it out. Revenue multiples are a rough check, because two businesses with the same sales can earn very different amounts.

Do I need a certified appraiser?

For a sale between a willing buyer and seller, usually not; the price is what the documented earnings support. Some situations call for a formal appraisal, such as certain SBA loans, estates, divorces, and partner disputes. Ask your lender or attorney.