Selling my business: How much is it worth?
Dylan Gans
March 13, 2023 ⋅ 8 min read
This article was originally written in March 2023 and has since been updated with new discoveries and research in 2025.
If you’re thinking about selling your business, the first thing you want to know is, “How much is my business worth?” Baton Market provides owners with free, accurate valuations and guidance to turn that number into a successful sale.
Below, we’ll cover what drives value, how to calculate it, and how to position your business to attract serious buyers.
Is My Business Worth Selling?
Common reasons owners sell include retirement, a new venture, relocation, burnout, or capitalizing on strong performance. If your cash flow is trending up, your operations are steady, and you’re ready to transition, you’re likely in a good position.
If profits are declining or financials are messy, a short period of cleanup can materially improve the value of your business and the bottom-line profit a buyer can justify.
Quick checklist:
Are your last 24–36 months of financials accurate and organized (P&L, balance sheet, tax returns)?
Can the business operate smoothly without your day-to-day involvement?
Do recent market trends favor your industry?
If you’re not sure how to think about pricing in context, see Baton’s guide on how much to sell a business for.
How Business Valuation Works (Simple, Accurate Terms)
Let’s demystify what a valuation really measures. Buyers and investors focus on cash flow, not just annual sales, because cash flow funds debt, reinvestment, and the owner’s pay.
Most small businesses are valued using Seller’s Discretionary Earnings (SDE) or EBITDA as the earnings base, then applying valuation multiples from comparable deals. In other words, the pricing is business-based on demonstrated earnings power rather than hopes and guesses.
Clean books matter. Organize add-backs (owner salary, one-time expenses, interest, taxes, depreciation, amortization, and other adjustments) to arrive at a defensible SDE or EBITDA. In other words, “adjusted cash flow” serves as the baseline for any accurate valuation and the starting estimate that most buyers will sanity-check.
To dive deeper into how earnings power drives price, Baton’s step-by-step article on calculating the price of a small business is a helpful primer.
Valuation Methods Explained
Baton typically triangulates using several methods, then weights them based on your business model and risk profile to reach a realistic current value that reflects market demand.
Market Approach (Multiples and Comparables)
Think “recently sold similar businesses.” Using comparable sales (“comps”), advisors apply an earnings multiple (e.g., 2.6× SDE or 4–6× EBITDA depending on size, industry, and risk). This is the most common and straightforward method for many Main Street deals.
The revenue multiplier is sometimes used for businesses with recurring revenue, where margins are consistent; however, earnings-based multiples typically carry more weight. Owners sometimes ask whether buyers just pay a multiple of “years' earnings.” In practice, buyers assess trailing and forward-looking performance, far more nuanced than a simple single-year math shortcut.
Income Approach (Capitalization and DCF)
If your cash flow is stable, a capitalization rate can convert next year’s earnings into today’s present value (e.g., value = next year’s SDE ÷ cap rate).
For companies with clear projected earnings or strong growth potential, a discounted cash flow (DCF) model values expected future cash flows at their present value to estimate a defensible current value. This method shines when growth is credible and sustainable.
Asset-Based Approach (Adjusted Net Assets)
Here, we add up the fair market value of tangible assets (equipment, inventory, real estate) plus intangible assets (goodwill, brand, IP), then subtract liabilities to estimate book value adjusted to market.
In formula terms: Total assets at market value minus liabilities = adjusted net assets. Asset-heavy companies (manufacturing, logistics, typically restaurants with significant kitchen equipment) may lean more on this approach.
A Note on P/E Ratios
The price-to-earnings ratio is a staple for publicly traded companies, but small private firms typically use SDE/EBITDA multiples to account for owner compensation, discretionary expenses, and private-company risk.
You’ll sometimes hear “price to earnings” shorthand in private deals, but ensure it’s apples-to-apples with your adjusted earnings base and not confused with a public-market metric.
What Drives Value Up (or Down)
Valuation is not a black box, it’s a risk-and-return conversation. Buyers translate what they see in your financials and operations into a multiple they’re willing to pay. This section highlights the levers that tend to move multiple higher or lower, so you can focus your prep.
Key drivers:
Cash flow quality: Consistent, growing profit and cash flow justify higher multiples; messy or volatile earnings drag them down.
Owner involvement: Lower owner dependence = lower risk = higher value.
Customer and supplier concentration: Diversification reduces risk.
Growth potential: Repeat revenue, strong pipeline, or upmarket expansion boosts perceived upside.
External factors: Financing conditions, sector market trends, and interest rates nudge multiples. Authoritative industry surveys track sentiment, time-to-close, and financing conditions on a quarterly basis.
Balance sheet reality: Debt and off-balance-sheet obligations are liabilities that affect what a buyer can pay; keep an up-to-date schedule alongside your total assets.
Mini checklist to improve value:
Document add-backs (owner salary, non-recurring costs, interest, taxes, depreciation, and amortization) clearly
Reduce owner dependency (delegate, SOPs, KPIs)
Tidy contracts, renew key customers, diversify revenue
Focusing on these areas can significantly enhance your business's appeal and sustainability for future growth.
How Baton Calculates a Free, Accurate Valuation
Baton combines technology with human expertise. You share recent financials; our valuation engine analyzes revenue patterns, SDE/EBITDA, industry comps, and external factors.
A valuation advisor reviews the outputs, applies appropriate valuation multiples, and sanity-checks them against similar companies and current buyer demand. You get a clear range, not a guesswork business valuation calculator result, with notes on what’s lifting or limiting the price.
(We never promise outcomes; the market decides. We make sure you go in prepared.)
From there, we can help you test demand with an off-market profile, attract prospective buyers and investors, and decide when to formally list.
What we look at:
Trailing 12–36 months of P&L, add-backs, working capital needs
Growth drivers (new channels, pricing power, upsell potential)
Risk markers (customer concentration, churn, supplier fragility)
Industry comps and buyer interest signals
For broader sales preparation, see our guides on things to consider when selling a business and a comprehensive guide to selling a small business.
Real-World Snapshots (Anonymized)
Brief, anonymized composites based on recent Baton work illustrate how small details can significantly impact outcomes. Notice how documenting cash flow and clarifying add-backs can significantly impact multiples, even at similar sales levels.
These insights collectively illustrate how different factors influence deal dynamics and valuation multiples:
Seasonal food concept (typically restaurants): The owner's SDE averaged $180K, with high summer peaks. After cleaning up add-backs and documenting prep systems, buyers perceived lower risk. Valuation moved from 2.1× to ~2.6× SDE as we proved stability beyond seasonality.
High-tech services MSP: Annual revenue of $3.2M, EBITDA $520K, strong MRR, and low churn. Competitive process with multiple offers; buyers stretched the earnings multiple due to sticky contracts and cross-sell upside.
Niche distribution: Tangible assets (forklifts, racking) were meaningful; adjusted net assets supported the floor value, while add-backs lifted SDE. Final price blended asset and earnings perspectives.
These examples underline a pattern: Document your numbers clearly, show durability, and the market rewards you.
Pricing Strategy, Offers, And Closing
You don’t need a single “perfect” number, you need a fair market range, plus a go-to-market plan. We’ll guide you through setting an ask, reading offers, and maintaining momentum to the finish line.
How to set the ask:
Establish your earnings base (SDE or EBITDA)
Apply realistic comps and a risk-adjusted multiple
Sanity-check with asset value for floor price (book value or adjusted net assets)
Consider a small premium if your pipeline or contracts justify it
Prepare to defend the number with data (quality of earnings, add-back schedule, customer metrics)
When offers arrive:
Evaluate total package (price, structure, taxes, depreciation, and amortization effects via allocation, timeline, and certainty)
Weigh stock vs. asset sale tax impacts with your CPA
Use time limits and clear milestones to keep momentum
Remember, setting a well-considered ask and thoroughly evaluating each offer can maximize your outcome and help ensure a smooth transaction process.
Common Mistakes to Avoid
Every sale has landmines that can slow you down or cost you real money.
This list surfaces the big ones so you can sidestep them early and keep leverage throughout the process:
Relying on a generic calculator: Valuation is context-rich; calculators miss nuance (owner role, contract quality, churn).
Overweighting headline annual revenue: Multiples are applied to earnings, not top-line alone.
Ignoring liabilities: Debt, leases, and working capital needs affect what a buyer can pay; here’s a plain-English primer on why liabilities reduce value.
Waiting too long to clean up: Sloppy books result in multiple entries and create confusion around depreciation and other non-cash items.
Listing far above the market: You’ll burn time and credibility; better to align with comps and let competitive interest do the work.
Understanding these crucial aspects can significantly enhance your approach to valuation and maximize your success in the process. Stay aware of these pitfalls to make informed, strategic decisions.
Make the Math Work for You
Valuation isn’t about guessing a number, it’s about telling a credible story with your data. Baton starts with a free valuation, then helps you position, price, and go to market with confidence.
If you’re ready to see where you stand and what it would take to exit well, start your free valuation today.