When owners ask what their business is worth, the real question is usually about the multiple: how many times earnings will a buyer pay? The honest answer is that there is no single number, but there is a clear logic. Your multiple reflects how much risk a buyer is taking on your earnings. This guide explains the ranges, what moves you within them, and how to read the multiple a buyer offers you.
Key takeaways
- Smaller owner-run businesses trade on SDE multiples (often low single digits); larger, more managed businesses trade on EBITDA multiples that rise with size and stability.
- The multiple is a risk score. Recurring revenue, low owner dependence, and diversified customers push it up.
- Add-backs matter. Get your normalized earnings right first, see SDE vs EBITDA.
- The same business can be worth very different amounts depending on how transferable it is. Test it with a buyer-fit check.
SDE vs EBITDA multiples
Smaller, owner-operated businesses are usually valued on a multiple of seller’s discretionary earnings (SDE), which includes the owner’s salary and benefits. These multiples tend to sit in the low single digits. As a business gets larger and runs with professional management rather than the owner, buyers shift to an EBITDA multiple, and those multiples climb, because a business that does not depend on one person is a safer, more scalable asset. The transition from an SDE business to an EBITDA business is often where the biggest jumps in value happen.
What moves your multiple up
- Recurring and contracted revenue that a buyer can count on after closing.
- Low owner dependence, the business runs without you in the building every day.
- Customer diversification, no single client makes or breaks the business.
- Growth, a business with a clear, credible growth story earns a premium.
- Clean, verifiable financials, three tidy years that survive due diligence.
What pulls your multiple down
The mirror image: heavy owner dependence, customer concentration, lumpy or one-off revenue, messy books, and declining trends. Each one is a reason for a buyer to discount, because each one is a risk they are underwriting. The good news is that most of these are fixable with lead time, which is why understanding your multiple a year or two before you sell is worth far more than finding out at the closing table.
Want to know the multiple a real buyer would actually pay for your business? Serava runs a private, confidential buyer-fit check, no listing required. Start at serava.ai/sell.
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