What Is My Business Worth

"What is my business worth?" is usually the first question an owner asks when succession starts to feel real. The answer depends on more than revenue. A buyer is paying for earnings durability, growth potential, transition risk, and whether the business can survive the owner stepping back. Understanding how each of those factors affects value gives owners a more realistic picture before they sit across from a buyer.

The most common valuation method: EBITDA multiples

Most small business acquisitions are priced as a multiple of EBITDA: earnings before interest, taxes, depreciation, and amortization. The multiple reflects how confident a buyer is in the future earnings of the business. Lower-risk businesses with recurring revenue and strong management depth trade at higher multiples. Owner-dependent businesses with concentrated customers trade at lower ones.

Typical multiples by business type

• Pest control and HVAC with strong service agreement books: 5 to 8 times EBITDA.
• Property management with diversified landlord base: 4 to 7 times EBITDA.
• Managed IT services with high monthly recurring revenue: 5 to 8 times EBITDA.
• General home services (landscaping, painting, concrete): 3 to 5 times EBITDA.
• Manufacturing with customer concentration: 3 to 5 times EBITDA.
• Staffing and professional services: 4 to 6 times EBITDA.

What drives value up

• Recurring or contractual revenue that does not disappear if the owner leaves.
• A management team that can run day-to-day operations without the owner.
• Diversified customers with no single account above 15 percent of revenue.
• Clean, well-documented financials going back three years.
• A business that has grown steadily rather than spiked around one event.
• Evidence that customers come back year after year and refer others.

What drives value down

• The owner is the primary salesperson, technician, or key account manager.
• Revenue depends on one or two large customers.
• Financials are mixed with personal expenses and hard to normalize.
• The business relies on licenses, certifications, or relationships the owner holds personally.
• Revenue has been flat or declining in recent years.
• There are deferred maintenance costs, equipment age issues, or compliance concerns.

How to calculate your normalized EBITDA

Start with net income from your tax return or financial statements. Add back interest expense, taxes, depreciation, and amortization. Then add back owner compensation above what it would cost to replace you with a manager doing the same job. Remove one-time items that inflate earnings. The result is your seller discretionary earnings or normalized EBITDA, which is what buyers use to anchor the conversation.

Revenue multiples as a secondary check

Some buyers, particularly in software and recurring-revenue service businesses, also look at revenue multiples. A business generating $1 million in revenue might trade at 0.5 to 1.5 times revenue depending on the margin profile and growth rate. Revenue multiples are less reliable than EBITDA multiples because two businesses with the same revenue but different margins are worth very different amounts.

Getting a real read before committing to a process

The most accurate way to understand what your business is worth is to have a confidential conversation with a buyer who actively acquires businesses in your industry. That conversation surfaces what buyers are actually paying today and whether your specific business fits a live mandate. It does not require disclosing financials to start.