Pricing your business begins with knowing how buyers think about multiples. For most main street and lower middle market companies, the benchmark is Seller’s Discretionary Earnings (SDE). Healthy firms usually trade for two to three times SDE, while those with recurring revenue, a strong management team, and clean books can reach three and a half to four times. When EBITDA clears the one-million-dollar mark, buyers switch to EBITDA multiples that run from four to six times, rising with size, growth, and industry appeal.
Multiples are just the headline. Lenders and private buyers restate your financials to remove one-off expenses, owner perks, and revenue that is not tied to operations. They trim value for customer concentration, key person risk, or big capital projects on the horizon. Clear statements, a documented growth plan, and transferable processes narrow that discount.
Industry matters too. Tech-enabled service firms and niche SaaS companies still command the upper end thanks to predictable revenue and high margins. Construction trades, distributors, and project-based service businesses trend closer to the median unless they show specialized expertise or regional dominance. Local economic conditions, interest rates, and buyer sentiment can move these ranges by half a turn either way, so staying current on market data is important.
Remember that value is a negotiation, not a formula. Buyers weigh fit, synergies, and their own cost of capital, so two companies with identical earnings can fetch very different prices depending on who is at the table. Start early by cleaning up the books, documenting procedures, and reducing reliance on yourself as the owner; those steps can raise your multiple more than chasing another year of modest growth.
