Most privately-held businesses sell for a multiple of their earnings. What that multiple is — and which earnings number it applies to — depends on the size of the business, the industry, and a short list of quality factors that buyers price the same way lenders price risk. This page explains how the pricing actually works, so the number you carry into a sale conversation is grounded in how buyers think rather than in rumor or wishful math.
For owner-operated businesses, the buyer is usually another owner-operator. What they're buying is the total economic benefit one working owner takes out of the business: pre-tax profit, plus the owner's salary and benefits, plus personal expenses run through the company, plus genuine one-time costs. That sum is seller's discretionary earnings. Smaller businesses commonly trade in the 1.5×–3.5× SDE range, with industry and quality factors deciding where in the range — and occasionally outside it — a specific business lands. See the per-industry ranges on our valuation multiples by industry page.
Once a business is large enough to run without the owner in the building — typically when there's a real management layer and earnings comfortably above what one operator could produce alone — buyers shift to EBITDA (earnings before interest, taxes, depreciation, and amortization) with a market-rate salary for a replacement manager subtracted. EBITDA multiples run higher than SDE multiples because the buyer is purchasing a system, not a job. The crossover point varies by industry; many deals in the lower middle market are negotiated on both lenses simultaneously.
Equipment, inventory, vehicles, and leasehold improvements set a floor under the price of an operating business. If a business earns little but holds valuable tangible assets, the asset value may BE the price. For a profitable going concern, normal operating assets are usually included in the earnings-multiple price rather than added on top — a point that surprises many sellers. Surplus assets (extra vehicles, a second location's idle equipment) can be carved out and priced separately.
If you own the building, the real estate is normally valued separately from the operating business. You can sell it with the business, or keep it and become your buyer's landlord — turning the sale into both a liquidity event and an income stream. Either path changes the deal structure, the buyer pool, and the financing, so it should be decided early, not at the closing table.
Two businesses with identical earnings can sell for very different prices. The difference is risk, and buyers price these factors with remarkable consistency:
A real valuation starts with your last three years of financials and tax returns, normalizes the earnings (owner compensation, one-time items, related-party rent), selects the right lens and comparable transactions for your industry and size, and then weighs the quality factors above. The output is a defensible range and a recommended go-to-market price — along with a candid list of the fixable items that would raise it. Done 12–24 months before a sale, that list is often worth more than the valuation itself.
Start a confidential inquiry — describe the business in two sentences and we'll outline what a valuation would look at before you share a single document. Want a number right now? Try the free SDE calculator. Or read how multiples vary by industry and what a confidential sale process protects.
Pre-tax profit plus the owner's salary, benefits, and personal expenses run through the business, plus one-time and non-operating costs. It's the total annual economic benefit one working owner receives — the number main-street buyers actually buy.
Convention varies by industry and deal size. Many main-street listings quote a price plus inventory at cost; larger deals typically include a normalized level of working capital. What matters is that the treatment is explicit in the offer — it's a common late-stage surprise when it isn't.
Calculators apply a generic multiple to a self-reported number. A broker opinion normalizes the earnings first, then applies industry- and size-specific comparables, then adjusts for the risk factors buyers actually price. Different inputs, different rigor, different number.
Nothing on this page is an appraisal, a broker price opinion, or an opinion of value for any specific business, and no statement here is a commitment that any business will sell at any particular price or multiple. Ranges describe commonly observed market patterns and individual results vary widely. Nothing on this page is legal, tax, or financial advice; consult your own advisors.
Dom Dominguez, MBA, MS is a Florida-licensed business broker. As required by Florida Real Estate Commission Rule 61J2, the broker license is registered with Hedgestone Business Advisors, a trade name of Steinberg Re Holdings, LLC, a Florida limited liability company (collectively, "Hedgestone"). Hedgestone neither owns nor operates this Site; this disclosure appears solely for brokerage-licensure compliance. Vaultolio is a brand name for the website only and is not itself a legal entity or licensed brokerage. Florida Broker License No. FL BK3529743. Mailing address: 2431 NW 92nd Ave, Coral Springs, FL 33065. Phone: 813-389-9466. Vaultolio does not claim or represent licensure in any other state.