When it’s time to sell your business, the first question is usually the hardest: What’s it worth?
The truth is, there’s no simple answer. Valuation isn’t one-size-fits-all — it depends on your industry, financials, growth potential, and the lens through which buyers view your business. But there are standard approaches that help sellers and brokers get to a fair, realistic number. Let’s break them down.
1. The Asset Approach: What You Own Minus What You Owe
This method adds up the value of everything the business owns — equipment, inventory, real estate — and subtracts liabilities. It’s straightforward and most useful for asset-heavy businesses, like manufacturers or trucking companies. But if your company’s true value lies in its brand, customer base, or recurring revenue, the asset method can seriously undervalue your business.
2. The Market Approach: What Others Are Paying
The market approach compares your business to similar companies that have recently sold. Think of it like real estate comps. If other businesses in your sector, size range, and geography are selling at 2.5x SDE (Seller’s Discretionary Earnings), that becomes a benchmark.
But market comps are only as good as the data behind them — and that’s where a broker adds serious value. We have access to private databases and industry reports most owners never see.
3. The Income Approach: What It’s Earning You
This is the most common method for small businesses. It focuses on profitability and future cash flow. The key number here is Seller’s Discretionary Earnings (SDE) — essentially your net income plus add-backs like owner salary, personal expenses, and one-time costs.
Once you’ve got a solid SDE, you multiply it by an earnings multiple — typically between 1.5x and 4x for small businesses. That multiple depends on factors like:
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Industry trends
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Owner involvement
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Recurring revenue
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Growth potential
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Risk
The higher the quality and sustainability of your earnings, the higher the multiple.
Why a Broker Matters — Early
Valuation isn’t just math. It’s strategy. A broker helps clean up financials, highlight strengths, and position the business for maximum value. Too many owners wait until they’re ready to list — by then, it’s often too late to make meaningful improvements.
Getting a valuation early helps you:
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Set realistic expectations
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Make smarter exit plans
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Maximize your sale price
Don’t leave money on the table. Know what your business is worth — and what it could be worth with the right preparation.
Michael Shea represents the Central Florida Transworld office. In business since 2005, he has established a reputation as a trusted business broker across Florida’s key markets- from Tampa to Orlando, Melbourne, and more. Over the past two decades, Michael and his team have closed over $1 Billion in sold business volume and presided over more than 400 transactions. His credentials include the IBBA Certified Business Intermediary®, and most recently, the prestigious Certified Exit Planning Advisor® (CEPA) credential.