The Short Version
Your valuation = SDE × Industry Multiple × Adjustments
- We calculate your SDE (Seller’s Discretionary Earnings) from the financials you provide.
- We apply a base multiple from real closed-deal transaction data for your industry.
- We adjust that multiple based on business size and 8 value drivers specific to your business.
- The result is a directional estimate — not a formal appraisal.
Most valuation tools are black boxes. You put numbers in and get a number out with no explanation of how they got there. We think you deserve to see the work. Here it is.
Step 1: We Calculate Your SDE
SDE = Net Profit + Owner’s Total Compensation
Owner’s compensation includes salary, distributions, health insurance, personal vehicle, and any other personal expenses run through the business.
SDE — Seller’s Discretionary Earnings — represents the total financial benefit available to a single owner-operator. It’s the standard valuation metric for businesses under roughly $5M in annual earnings because it normalizes for the wide variation in how owners pay themselves.
One owner might take a $300K salary and show $100K in net profit. Another might take $80K in salary and show $320K in profit. Both businesses have $400K in SDE — both are worth the same to a buyer.
For larger businesses, EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is more common. When we have EBITDA multiples for your industry, we show both.
If you want to calculate your SDE before taking the assessment, use our free SDE calculator.
Step 2: We Apply Your Industry Multiple
We maintain SDE multiples for 57 industries across 10 categories, sourced from closed transaction data. Each industry has three data points:
- Median multiple — the typical sale price as a ratio of SDE
- Low-end multiple — what weaker businesses in the industry trade for
- High-end multiple — what premium businesses command
For example, HVAC businesses trade at a median of 3.51x SDE, with a range of 1.90x to 6.60x. That means an HVAC company with $500K in SDE would typically sell for around $1.75M, but could range from $950K to $3.3M depending on the specifics.
These multiples are updated quarterly. Current data reflects Q1 2026 transactions.
For industries not in our database, we use category-level medians (calculated from all industries in that category) or cross-industry medians with a wider confidence range to reflect the added uncertainty.
View the full industry multiples report →
Step 3: We Adjust for Business Size
Larger businesses command higher multiples. This isn’t arbitrary — bigger businesses tend to have more management infrastructure, less owner dependency, more diversified revenue, and they attract more buyer competition (including private equity firms and strategic acquirers who pay premiums).
We apply a size adjustment based on your SDE:
| SDE Range | Multiple Adjustment |
|---|---|
| Under $100K | −12% |
| $100K – $250K | −4% |
| $250K – $500K | Baseline (no adjustment) |
| $500K – $1M | +10% |
| $1M+ | +18% |
A business with $150K in SDE and a business with $1.2M in SDE in the same industry are fundamentally different assets. The size premium reflects that reality.
Step 4: We Score 8 Value Drivers
Beyond industry and size, the specific characteristics of your business matter enormously. Two HVAC companies with identical revenue and SDE can sell for vastly different multiples based on how they score across these eight factors.
Each factor adjusts your multiple up or down based on your answer:
1. Recurring Revenue
What percentage of your revenue is under contract — service agreements, maintenance contracts, subscriptions, retainers.
Strong performance adds up to +28% to your multiple. Weak performance subtracts up to −8%.
2. Owner Dependency
How involved are you in day-to-day operations — sales, service delivery, managing employees, customer relationships.
Strong performance adds up to +18% to your multiple. Weak performance subtracts up to −15%.
3. Customer Concentration
What percentage of revenue comes from your single largest customer. High concentration equals high risk in a buyer’s eyes.
Strong performance adds up to +8% to your multiple. Weak performance subtracts up to −18%.
4. Revenue Trend
Your 3-year growth trajectory. Buyers pay premiums for momentum.
Strong performance adds up to +15% to your multiple. Weak performance subtracts up to −18%.
5. Financial Documentation Quality
How clean are your financial records — tax returns, P&L statements, balance sheets.
Strong performance adds up to +12% to your multiple. Weak performance subtracts up to −10%.
6. Management Team Depth
Do you have an ops manager, field supervisors, sales leads — or is everything running through you?
Strong performance adds up to +18% to your multiple. Weak performance subtracts up to −12%.
7. Years in Business
Track record reduces perceived risk. Longevity proves the model works through economic cycles.
Strong performance adds up to +8% to your multiple. Weak performance subtracts up to −10%.
8. Systems and Process Documentation
SOPs, training manuals, CRM, job management software. Documented systems reduce transition risk.
Strong performance adds up to +12% to your multiple. Weak performance subtracts up to −8%.
Combined, these 8 drivers can swing your multiple by as much as −60% to +80%. A business that scores well on all eight can command a multiple 50–80% above the industry median. A business that scores poorly on several can trade at 30–50% below.
Step 5: We Generate Your Range
Nobody can tell you the exact price your business will sell for. Anyone who claims otherwise is selling something. What we can give you is a realistic range based on real data.
We generate three estimates:
- Conservative estimate — uses the adjusted low-end multiple for your industry. This is the floor: what your business might sell for in a buyer’s market or with limited buyer interest.
- Most Likely estimate — uses your adjusted median multiple. This is the center of gravity: where most transactions in your industry land after accounting for your specific value drivers.
- Optimistic estimate — uses the adjusted high-end multiple. This is what’s achievable with strong buyer competition, favorable deal terms, or a strategic acquirer.
The total adjustment from size and value drivers is capped at −60% to +80% to keep multiples within realistic bounds. Even a business that scores perfectly on every factor won’t show multiples that don’t exist in the real market.
What This Is (and What It Isn’t)
What it is
A directional estimate based on real transaction data and valuation principles. It’s designed to give business owners a realistic range of what their business might sell for.
What it isn’t
A formal business appraisal. It doesn’t account for real estate, equipment, inventory, working capital adjustments, deal structure, buyer type, or dozens of other factors that affect actual sale price.
When to use it
To get a baseline understanding of your range, identify your strongest and weakest value drivers, and decide whether it’s worth pursuing a professional valuation.
When to get a professional valuation
When you’re within 12 months of going to market, when you need a number for legal/tax/financing purposes, or when you want a buyer-ready analysis.
Our Data Sources
- Industry multiples: Compiled from publicly available transaction data, business broker databases, and market reports.
- Update frequency: Quarterly. Current data reflects Q1 2026.
- Coverage: 57 specific industries across 10 categories (Adjacent Services, Business Services, Construction, Environmental Services, Healthcare, Home Services, Manufacturing, Wholesale, and more).
- Fallback methodology: For industries not in our database, we use category-level or cross-industry median multiples with a wider confidence range to account for the added uncertainty.
We don’t pretend our data is perfect. Transaction data for privately held businesses is inherently limited — most deals are never publicly reported. But directional data from real transactions is vastly better than guessing, and it’s infinitely better than the inflated numbers some brokers use to win listings.
Try It Yourself
The best way to understand the methodology is to run your own numbers. The assessment takes about 3 minutes and is completely free and confidential.
Get your valuation estimate
See your estimated range, understand your value drivers, and find out where you stand.
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