OWNER'S FIELD GUIDE · AUGUST 2026
How to value a small business.
Choose the right method, normalize what a buyer actually inherits, match real sale evidence, and separate business value from the cash a seller ultimately receives.
Find my starting methodSpecific US sale categories
Nail salons
Median of 26 category averages
Car washes
Reported completed-sale cash-flow multiples for Q3 2021–Q2 2026. Inspect the public source table
THREE QUESTIONS · NOTHING SUBMITTED
Which method should you investigate first?
This selector recommends a starting approach, not a dollar value. Your answers stay in this browser and are not saved to an account.
You'll get the first approach to investigate and the cross-checks most likely to prevent a misleading answer. Nothing is submitted or stored.
THE FOUR-STEP WORK
The formula is the easy part.
A defensible conclusion depends on defining the earnings, comparison set, assets, and transaction terms before doing the multiplication.
Choose the right valuation approach
Start with the economics of the company: repeatable earnings, the owner’s operating role, the asset base, and whether forecasts can be supported.
Normalize the earnings
Use one consistent period and reconstruct the cash flow a buyer can reasonably expect after ownership transfers. For an owner-operated company, this often means defensible seller’s discretionary earnings.
Build SDE from the ledgerApply comparable market evidence
Match the closest business type and size, apply the relevant earnings multiple, and use revenue as a cross-check rather than averaging incompatible answers.
Compare 26 business typesBridge indicated value to deal proceeds
Define the assets, inventory, working capital, cash, debt, real estate, taxes, fees, and transaction terms included in the conclusion.
Model cash at closingTHREE RECOGNIZED LENSES
No single approach fits every business.
The SBA identifies income, market, and asset approaches as common valuation methods. The right weighting depends on what actually produces value in the company.
Read the SBA guidanceWhat did comparable businesses sell for?
Apply relevant transaction multiples to a consistent earnings or revenue measure. Similarity, sample quality, date, size, and terms determine how useful the comparison is.
What are supportable future cash flows worth today?
Capitalize maintainable earnings or discount projected cash flows using a return that reflects risk. Forecasts must be supportable, not simply optimistic.
What remains after assets and liabilities are adjusted?
Often more relevant for asset-heavy, holding, distressed, or weak-earnings companies. Book value may differ substantially from supportable market value.
VALUE IS NOT TAKE-HOME CASH
Define what the number includes.
Two buyers can agree on the same operating value and still produce very different economics for the seller.
YOUR BUSINESS · PRIVATE
Now use your industry and numbers.
Create a private account, choose SDE or EBITDA, and see the applicable public market references separately. Contributing more operating context unlocks richer anonymized cohorts.
COMMON QUESTIONS
Valuation without shortcuts
What is the basic formula for valuing a small business?
For many profitable owner-operated businesses, a useful market starting point is normalized SDE multiplied by a comparable business-type cash-flow multiple. Public average multiples in this dataset range from 1.74× to 4.87× across 26 specific business types. That produces a market reference, not a complete appraisal or guaranteed sale price.
Should I use revenue, SDE, or EBITDA?
SDE is often the most useful starting earnings measure for a profitable business operated by one working owner. EBITDA or another transferable cash-flow measure is more appropriate when market-rate management compensation remains in the expenses. Revenue can cross-check either method, but it ignores margin differences and should not be averaged blindly with an earnings result.
Do I add inventory and equipment to an SDE valuation?
Not automatically. Assets required to produce the earnings may already support the cash flow being capitalized. Inventory, working capital, equipment, real estate, excess assets, and assumed liabilities must be defined in the transaction structure before deciding whether a separate adjustment is appropriate.
Is a business worth only what someone will pay for it?
An arm’s-length completed sale is strong evidence of the price realized by one buyer and seller on a specific date and under specific terms. Valuations are also prepared before a sale and for planning, ownership, tax, or dispute purposes, so the relevant standard, date, interest, and assumptions still matter.
Does this method estimate what the owner takes home?
No. An indicated operating-business value is not the same as seller proceeds. Debt, cash, working capital, inventory, real estate, transaction fees, taxes, financing, earnouts, and other deal terms can materially change the amount and timing of what a seller receives.