Start with the number that matters: maintainable earnings
Most small business pricing starts with maintainable earnings, not revenue.
Two common ways people talk about it:
- SDE (Seller’s Discretionary Earnings): profit + owner add-backs (owner wage, personal expenses, one-offs)
- EBIT / EBITDA: used more for larger businesses with a management structure
For owner-operated SMEs, SDE is often the most practical starting point.
The simplest valuation method (and why it works)
A common approach is:
Value ≈ Maintainable earnings × Multiple
The multiple reflects risk and quality:
- how reliable the earnings are
- how dependent the business is on the owner
- customer concentration and churn risk
- quality of systems, quoting, delivery, invoicing
- strength of the team
- asset intensity and capex needs
What pushes your multiple up (buyers pay more for this)
Buyers tend to pay more when:
- revenue is repeatable and margins are stable
- customers are diversified (not one big “make or break” client)
- the owner can step back without the wheels falling off
- basic systems exist (jobs, quoting, scheduling, invoicing)
- there’s a capable 2IC / supervisor layer
- cash conversion is clean (stock/WIP/debtors not a mess)
What pushes your multiple down (and it’s fixable)
Common value drags:
- “the owner is the business”
- poor financial hygiene (messy coding, unclear add-backs)
- lumpy project work with weak forward visibility
- outdated pricing / no margin discipline
- high customer concentration
- under-maintained equipment or looming capex
Don’t forget: working capital and debt change the cheque amount
Even with the same headline valuation, the final cash to you depends on:
- how much stock and WIP is included
- debtor levels at handover
- any business debt or asset finance
- lease obligations
This is why two “same multiple” deals can feel very different.
Want a confidential sanity-check range?
Share a high-level snapshot (you can stay anonymous initially):
- industry/type of business
- rough revenue range
- rough owner earnings range (or profit)
- owner involvement (hours + key tasks)
- timing and preferences (full sale vs majority/staged)
Request a confidential chat:
FAQs
Can you value my business without seeing financials?
You can get an indicative range from a high-level view, but anything firm needs proper numbers.
Is revenue a good proxy for value?
Not really. Two businesses with the same revenue can have wildly different profits, risk, and owner dependence.
What if my numbers are messy?
That’s common. A simple clean-up often increases both confidence and value.
Do buyers pay for “potential”?
Sometimes — but buyers mainly pay for proven earnings and a believable path to maintain or improve them.