A main-street business in Tennessee typically sells for 1.5 to 2.5 times the owner's true annual earnings. Memphis or Maryville, the range holds steady. Tennessee's closing traps are a tax hold-back rule with three escape hatches and a contractor license that refuses to follow the business.
Your tax returns almost always prove a higher number.
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| Business type | Revenue multiple | Owner-earnings (SDE) multiple |
|---|---|---|
| Hair salon / Barbershop | 0.35 to 0.65 times yearly revenue | 1.5 to 2.5 times owner earnings |
| Cleaning service | 0.5 to 0.9 times yearly revenue | 1.8 to 2.8 times owner earnings |
| Landscaping / Lawn care | 0.45 to 0.85 times yearly revenue | 1.8 to 2.8 times owner earnings |
| Restaurant / Cafe | 0.25 to 0.45 times yearly revenue | 1.3 to 2.2 times owner earnings |
| Auto repair / Detailing | 0.4 to 0.75 times yearly revenue | 1.7 to 2.6 times owner earnings |
| Retail shop | 0.3 to 0.6 times yearly revenue | 1.5 to 2.3 times owner earnings |
| Other service business | 0.35 to 0.7 times yearly revenue | 1.5 to 2.5 times owner earnings |
Tennessee law puts your buyer on the hook for your unpaid sales tax unless they hold back enough of the price to cover it. The hold ends when you deliver one of three things: a receipt from the Department of Revenue showing taxes paid, a certificate stating nothing is due, or a sworn tax affidavit, which only works if a copy is properly submitted to the Department. A buyer who pays out without one of these can be personally liable up to the full amount they paid you.
Pick your document early and start the process before diligence begins. A clearance from the Department in your closing folder means no escrow, no delay, and no awkward call from the buyer's lawyer.
In Tennessee, bidding or contracting any project of 25,000 dollars or more requires a license from the Board for Licensing Contractors, and that license is issued to a specific entity backed by a qualifying agent who passed the exam. It does not transfer when you sell. Your buyer must qualify on their own, with their own exam, financial statement, and application, and that can take months.
If you are selling a contracting business, make the buyer's licensing the first milestone on the deal calendar. A buyer who cannot legally bid work the day after closing bought a parked truck, and sophisticated buyers price that risk against you.
Tennessee courts pick apart employee non-competes, but a covenant attached to the sale of a business gets friendlier treatment, because the buyer paid you for the goodwill it guards. Reasonable time and territory limits will be upheld. Read yours as a binding promise about where you can work and for how long, and have a licensed attorney review it before signing. One flat fee at closing, usually payable from proceeds.
First task: gather three years of business tax returns. SBA lenders anchor every buyer loan to that history, and most main-street deals do not close without SBA money or seller financing. Pull your free range below, then get your number documented before you float a price to anyone.
Most main-street businesses sell for 1.5 to 2.5 times the owner's true yearly earnings, or their replacement value, whichever is higher and can be proven. True earnings means salary plus profit plus the personal things the business pays for. Most owners forget those add-backs count, so most owners guess low.
SBA lenders require three years of business tax returns to finance a buyer. Three years also shows a trend, not a snapshot. We saw a salon whose latest year looked like decline. Three years proved it was one expensive staffing year, and that was worth tens of thousands on her price. Fewer years looks like hiding. More rarely changes the number.
No. YourBizWorth is not a broker, appraiser, or law firm. We prepare your analysis and drafts. We flag exactly which steps need a licensed attorney, usually one flat-fee engagement at closing, often payable from the sale money. We make the lawyer cheaper, not absent.