What Is My Business Worth? A Simple Guide for Retiring Owners

You've spent decades building something real — a plumbing business, a diner, a print shop. Now you're thinking about selling. But before you call a broker or list it anywhere, you need to answer one question: what's it actually worth?

Most retiring owners either guess too high (and sit on the market for years) or get low-balled by the first buyer who walks in. This guide will give you a realistic framework — no jargon, no MBA required.

Start Here: What Is SDE?

Seller's Discretionary Earnings (SDE) is the single most important number when valuing a small business. It answers: how much money does the business put in the owner's pocket each year?

SDE = Net profit + owner's salary + owner perks + one-time expenses

Here's an example. Suppose your plumbing business shows $80,000 net profit on the tax return. But you also pay yourself a $120,000 salary, run your personal truck through the business ($12,000/year), and had a one-time $20,000 equipment repair last year. Your SDE is actually:

For larger businesses (typically $5M+ revenue), buyers use EBITDA instead. But for most small businesses owned and operated by a single owner, SDE is the right metric.

The Valuation Formula: SDE × Multiple

Once you know your SDE, valuing the business is straightforward:

The "multiple" is a number — usually between 1.5x and 4x — that reflects how desirable the business is to a buyer. A stable, profitable, easy-to-run business commands a higher multiple. A chaotic business that depends entirely on the owner being there every day gets a lower one.

Typical Multiples by Industry

These are rough ranges for Main Street businesses (under $5M revenue). Your specific situation will vary.

What Pushes Your Multiple Up

Buyers pay more when the business is less risky and easier to take over. Here's what moves the needle:

• Recurring revenue — contracts, subscriptions, repeat customers who don't need convincing
• Documented systems — written procedures so the business runs without you knowing every secret
• A good team — employees who know the job and will stay after the sale
• Clean books — 3 years of organized financials make buyers feel safe
• Growth trend — revenue going up, not flat or down
• Seller training — offering to stay on for 3–6 months reduces buyer risk considerably

What Drags It Down

• Owner dependency — if the business falls apart the day you leave, that terrifies buyers
• Customer concentration — one client makes up 40%+ of revenue? Big red flag
• Deferred maintenance — broken equipment, aging facilities, deferred upgrades
• Messy financials — personal expenses mixed in, inconsistent record-keeping
• Declining revenue — even a small dip in the final year spooks buyers

The 5 Most Common Mistakes Sellers Make

1. Waiting too long to start

The average business sale takes 6–12 months. If you want out by end of year, start now. Most owners underestimate the timeline.

2. Anchoring to what you need, not what it's worth

A buyer doesn't care that you need $800K to retire comfortably. They'll pay what the cash flow justifies. Mispricing high means sitting on the market for years — and buyers get suspicious about why it hasn't sold.

3. Only cleaning up the books at sale time

Buyers look at 3 years of financials. If your last two years are messy and only year three looks clean, that raises questions. Start getting organized 2–3 years before you want to sell.

4. Telling employees too early

The moment key employees hear "the boss is selling," some start looking for other jobs. Keep the circle tight until you're close to a signed deal.

5. Rejecting the first serious offer

The first offer is often the best one. Buyers who've done their homework and move quickly are usually serious. Don't hold out for a higher number that may never come.

The difference between those two numbers isn't luck. It's preparation. Every item in the "pushes your multiple up" list is something you can work on before you list.