How Much Is My Business Worth?
How small businesses are valued in plain words: what buyers pay for, the common ways to value a business, and who can give you a professional valuation.
In plain words
A small business is usually worth what a buyer will pay for the money it earns for its owner, plus its equipment and inventory. A CPA or a professional valuation can give you a reliable number for your own business.
Step by step
- 1
Know what the business earns for its owner
For most small businesses this is seller's discretionary earnings: profit plus the owner's pay and certain personal or one-time costs. Larger businesses often use EBITDA.
- 2
Compare with similar businesses
Buyers and lenders look at what similar businesses in your industry have sold for, measured against their earnings.
- 3
Add what you own
Equipment, vehicles, inventory, and sometimes property add to the value.
- 4
Look at what raises or lowers value
Steady earnings, loyal customers, good records, a trained team, and a business that runs without you raise the value. Depending on one big customer, or on the owner, lowers it.
- 5
Get a professional opinion
A CPA or a certified business appraiser can prepare a business valuation. Lenders often require one for an SBA loan.
In more detail
Common questions
How much is my business worth?
Usually a multiple of what it earns for its owner, plus its equipment and inventory. The multiple depends on your industry, size, and risks; a CPA or appraiser can give you a number for your business.
How is a business valued for sale?
Most small businesses are valued by their seller's discretionary earnings compared with similar businesses that sold, plus the value of their assets.
How can I raise the value of my business?
Keep clean records, grow steady earnings, train a team so the business runs without you, and avoid depending on a single customer.
Who can value my business?
A CPA, a certified business appraiser, or a business broker can estimate its value. Find CPAs near you in the Business Partner Match professional directory.
Find help near you
BPM does not accept or store any paperwork. After your first phone call, buyer and seller exchange email addresses and share documents directly.
Topics in this category
- What buyers are really paying for
- Seller's discretionary earnings and EBITDA
- Common ways businesses are valued
- What raises or lowers the value
- Getting a professional valuation
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