By Andreas Pettersson, Founder, Leaders ADAPT
You typed "how much is my business worth" late on a Sunday. I know because owners tell me the time of day. The number you want is one line long. The honest answer is two lines: here is the math, and here is why the math will move once a buyer looks at who runs the place.
I built Arcules from zero to 150 people and sold it to Canon, then ran it as Canon's youngest standalone CEO. I have watched a price get written down and one get defended, and the difference was never the spreadsheet. It was whether the company ran without the person selling it.
This page gives you the owner math, the multiples by deal size from a dated source, the three things that move the number, and a worked example. Then it tells you how to find out whether you are ready for the exit you are now excited about.
Quick answer: A privately held business is worth its normalized earnings times a market multiple. Under about $2 million in purchase price the earnings figure is seller's discretionary earnings, above that it is adjusted EBITDA. In Q2 2026 the IBBA Market Pulse recorded median multiples from 2.0 times SDE to 5.8 times EBITDA by deal size. Owner dependency, management team and earnings quality decide where in that range you land.
Leaders ADAPT does not broker sales, write formal valuations or represent buyers. Every market figure on this page comes from a named third party, is linked, and carries its date. If their number has changed, theirs wins. Leaders ADAPT's own exit readiness work is a fixed fee quoted per engagement after a first call, and the first step, the assessments and that call, is free.
What "how much is my business worth" actually asks
Three owners ask this question. The tired one wants a number big enough to stop. The curious one wants to know whether ten years added up to anything. The one who has been approached wants to know whether the offer in the inbox is fair.
In our own coaching and assessment data, 20 percent of 84 owner CEOs raised succession in a first conversation, and almost none of them had a number. They had a feeling about a number. The point of this page is to replace the feeling with a band you can defend, and then to show you which of your own decisions widen or narrow that band.
One rule before the math. A business is worth what a buyer will pay for the earnings they believe will continue after you leave. Believe. Continue. After you leave.
SDE vs EBITDA: the owner math
Small companies and larger companies are priced on two different earnings figures, and most owners are quoted the wrong one.
Seller's discretionary earnings (SDE) is the total financial benefit one owner operator takes from the business in a year. Start with pre tax profit. Add back your own salary and payroll taxes. Add back interest, depreciation and amortization. Add back the discretionary items, the car, the family member on payroll who does not come to work, and the one time items, the lawsuit, the move. What you get is the cash one owner could take home if they ran the company the way you do.
Adjusted EBITDA does one more thing. It assumes the buyer is not going to run the company personally, so it deducts a market rate salary for a general manager or CEO. It also strips out add backs a buyer will not accept, which is where a quality of earnings review earns its fee.
The IBBA and M&A Source Market Pulse, the quarterly survey of US business brokers and M&A advisors, draws the line this way: purchase prices under $2 million are reported as multiples of SDE, and $2 million to $50 million as multiples of EBITDA. That is where a business stops being a job with a payroll and becomes a company someone else can own.
The same business can produce a $1.8 million SDE figure and a $1.5 million EBITDA figure, because $300,000 of your compensation is really the cost of the person who replaces you. If a buyer applies an EBITDA multiple to your SDE number, you will think the offer is low. It is the right multiple on the wrong earnings line.
The multiples table by deal size, Q2 2026
The figures below are the median multiples by purchase price band from the IBBA and M&A Source Market Pulse Q2 2026 Highlights, based on a July 2026 survey of brokers and advisors reporting completed transactions. Under $2 million the multiple is of SDE. From $2 million up it is of EBITDA.
| Purchase price band | Earnings basis | Median multiple, Q2 2026 | Same quarter 2025 | What the band usually looks like |
|---|---|---|---|---|
| Under $500,000 | SDE | 2.0x | 2.3x | An owner's job with a few employees, buyer is an individual |
| $500,000 to $1 million | SDE | 2.8x | 2.8x | Owner still runs sales and operations, a manager or two |
| $1 million to $2 million | SDE | 3.1x | 3.0x | A real team, owner still the key relationship |
| $2 million to $5 million | EBITDA | 4.0x | 3.9x | Management layer exists, buyer may be a search fund, individual or small PE |
| $5 million to $50 million | EBITDA | 5.8x | 5.5x | Management team runs it, private equity and strategics compete |
Three notes on reading the table.
First, the bands are by purchase price, so the math is a little circular. You estimate earnings, pick the band your result lands in, and check that the multiple still puts you in that band. If it does not, use the lower band. Buyers do.
Second, the jump from 3.1x SDE to 4.0x EBITDA is not a step up. The earnings line changed. A company with $600,000 in SDE and a $200,000 replacement salary has $400,000 in EBITDA, and 4.0 times $400,000 is less than 3.1 times $600,000. The reward for crossing the line comes later, in the $5 million plus band, where the same IBBA survey of 300 advisors found that 83 percent of deals over $5 million drew at least three offers in Q1 2026. Competition is what moves a multiple, and competition shows up when the company is big enough and clean enough for several buyers to want it.
Third, who is buying changes by band. The Q4 2025 Market Pulse reported first time buyers making 46 percent of Main Street acquisitions in 2025, while private equity made roughly a fifth of lower middle market deals. A first time buyer is buying a job and prices your presence as a risk. A private equity buyer is buying a platform and prices your absence as a requirement. The 2026 Pepperdine Private Capital Markets Report, as summarized by BVWire, put PE's median expected return at about 20 percent for companies with $1 million to $5 million in EBITDA. Your multiple is the inverse of that, adjusted for how sure they are the earnings continue. The business broker vs M&A advisor page sorts which advisor fits which band.
The three things that move the number
Inside any band, the median hides a wide spread. Three things decide whether you land above it or below it, and all three are leadership decisions, not finance decisions.
1. Owner dependency. If you hold the top ten customer relationships, approve every quote, and are the only person who knows why the numbers are what they are, the buyer is not buying a company. They are buying you, and you are leaving. The response is a lower multiple, a bigger earnout, or both. The key person risk page has the test. The short version: take two weeks off with your phone in a drawer and read what breaks.
2. The management team. The question a buyer asks in the second meeting is "who runs this on a Tuesday if you are not here." If the answer is a named team with a rhythm, a scorecard and decision rights, you move up the band. If the answer is "me, but I have a great ops person," you stay at the median or below. Every owner I meet who tried to hire a general manager once, watched it fail, and decided to sell instead of trying again is carrying that failure into the price. No second in command lowers the number. The what buyers look for in a management team page lists what they check.
3. Earnings quality. Recurring revenue beats project revenue. Ten customers at 10 percent each beats one at 60. Accrual books beat cash books. Add backs you can document beat add backs you can explain. A buyer's quality of earnings team will rebuild your EBITDA from bank statements and contracts, and every dollar they cannot verify comes off at the multiple. On a 5x deal, a $200,000 add back they reject is a $1 million haircut.
None of the three is "grow revenue." A $15 million company that depends on its owner sells for less than a $10 million company that does not. Most owners spend their last two years chasing revenue and ignoring the three things that set the multiple.
A worked example: the $12 million services company
Take a company with $12 million in revenue, 60 employees, owner led since day one. Here is the math a buyer runs, in order.
Step one, normalize earnings.
| Line | Amount | Note |
|---|---|---|
| Pre tax profit | $1,100,000 | From the tax return, not the management report |
| Owner salary and payroll tax | $450,000 | Added back in full for SDE |
| Interest | $60,000 | Added back |
| Depreciation and amortization | $140,000 | Added back |
| One time legal settlement | $50,000 | Added back with documents |
| Spouse on payroll, vehicles, travel | $80,000 | Added back, each item documented |
| Seller's discretionary earnings | $1,880,000 | What one owner operator takes home |
| Less market rate GM salary | $250,000 | What a buyer must pay someone to do your job |
| Adjusted EBITDA | $1,630,000 | The number a buyer above $2 million prices |
Step two, apply the band. At $1.63 million in EBITDA, 4.0x gives $6.5 million and 5.8x gives $9.5 million. Both land in or near the $5 million to $50 million band, so the honest range is $6.5 million to $9.5 million, a $3 million spread on the same earnings.
Step three, place the company in the spread. This is where the three drivers do their work.
Owner dependency: the owner closed eight of the top ten accounts and still runs the weekly pipeline call. Down.
Management team: a strong operations lead, no sales leader, finance run by a bookkeeper and the owner's instinct. Down.
Earnings quality: 70 percent of revenue is on annual contracts, top customer is 14 percent, books are accrual but the add backs for travel have no receipts. Mixed.
A buyer reads that and lands around 4.5x, call it $7.3 million, with $1 million of it in an earnout tied to the owner staying 18 months. The owner reads the table, sees 5.8x, expects $9.5 million cash, and feels insulted.
Nobody lied. The gap is the price of the three things the owner did not fix. Over 24 months, hiring a sales leader, moving the pipeline call to the ops lead, and getting the books through a sell side quality of earnings review could plausibly move the same company to 5.5x on $1.7 million, which is $9.4 million with less earnout. That is leadership work.
Where AI fits in a valuation
Two places, and the second one surprises owners.
First, the obvious one. AI tools now do the normalization pass in hours. Load three years of general ledger detail and bank statements into a well set up model and it will flag the add backs, find the customer concentration, and build the SDE to EBITDA bridge. I run a Fractional AI Executive offer with technical partners, and this is a common first job for an owner thinking about a sale. It does not replace the quality of earnings firm. It tells you what that firm will find, a year early, while you can still fix it.
Second, the one that moves the multiple. A buyer asks how much of the owner's judgment lives in the owner's head versus in a system. A company knowledge system, an operations manual an AI assistant can answer from, and a sales process that runs on a CRM rather than your memory all reduce owner dependency in a way a buyer can see on a screen. That is the connection between AI for EOS companies and your exit price: the same work that makes a company run without you makes it worth more without you.
One caution. The what not to delegate to AI page lists the decisions that stay with you, and whether to sell, and to whom, is on it. The IBBA's Q1 2026 survey found 67 percent of advisors saw no material impact from AI on valuations yet. The impact today is on your readiness, not the buyer's formula.
What a valuation does not fix
A number does not fix the reasons the number is low.
It does not fix the fact that you hate one on ones, so your managers have never been managed, so a buyer sees people who execute your instructions rather than run their functions. It does not fix the delegation that boomerangs back to your desk every Friday, which a buyer reads as owner dependency whatever the org chart says. It does not fix a finance function that reports six weeks after month end, so every number you quote is a guess.
It does not fix timing either. Owners decide to sell in a hard year and want the price from a good year. The 24 month prepare a business for sale sequence tells you how to move, and leadership team development is usually the first quarter of that sequence, because the management team is the driver you can change fastest.
And it does not fix an owner who is not ready to leave. I have seen a deal die at the finish line because the seller realized, papers in front of him, that he had no idea what Monday looked like. That is a readiness question, and it is the one I ask first.
Who is on the bench for this
I do the first read myself. When the numbers need a finance leader, I bring one in from the Leaders ADAPT bench and stay in the room.
Steve Shaw is the fractional CFO on the bench for this work. Steve has twenty years in finance leadership and works with owners on clean books, cash discipline and financial positioning before a sale. He builds the SDE to EBITDA bridge properly, documents the add backs so they survive diligence, and sits beside you for the numbers conversation with buyers and lenders. He will also tell you which add backs to stop arguing for.
Thor Legvold is the leadership psychologist on the bench. Thor runs the assessments and the executive fit work, which is how we answer the management team question before a buyer asks it. When the honest read is that the operations lead cannot become a general manager, Thor is the one who says so and helps decide what to do about it.
Sergey Dmitriev is the fractional CTO and AI systems partner. When owner dependency lives in undocumented knowledge, Sergey builds the company knowledge system that makes the business legible to a buyer, and trains the leadership team on the tools with me.
Every engagement runs through Leaders ADAPT. I take the first call, match the partner and stay accountable.
How much is my business worth FAQ
How much is my business worth, in one formula?
For most owner run companies the answer is earnings times a multiple. Under about $2 million in purchase price the earnings figure is seller's discretionary earnings, which adds your salary and perks back. Above that it is adjusted EBITDA, which deducts a market rate manager salary. In Q2 2026 the IBBA Market Pulse recorded median multiples from 2.0 times SDE to 5.8 times EBITDA by deal size.
What is the difference between SDE and EBITDA?
SDE is the total financial benefit one owner operator takes from the business: pre tax profit plus owner compensation, interest, depreciation, amortization and discretionary or one time costs. EBITDA removes the owner from the picture by deducting a market rate salary for whoever would run the company. Small businesses trade on SDE, larger ones on EBITDA, and the multiple rises as the owner matters less.
Is a business valuation calculator accurate?
An online business valuation calculator gives you a rough band, not a price. It cannot see customer concentration, owner dependency, the strength of your management team or how clean the books are, and those move the multiple by a full turn or more. Use a calculator to decide whether a sale conversation is worth having, then get a real read before you set your expectations.
What EBITDA multiple does a small business sell for?
Per the IBBA and M&A Source Market Pulse for Q2 2026, companies that sold for $2 million to $5 million went for a median of 4.0 times EBITDA and companies in the $5 million to $50 million band for 5.8 times. Below $2 million the market quotes multiples of SDE instead, from 2.0 times under $500,000 to 3.1 times between $1 million and $2 million.
What lowers the value of a business the most?
Owner dependency. If the owner holds the customer relationships, makes every decision and is the only person who understands the numbers, a buyer prices the business as if the engine leaves at closing, so the multiple drops or part of the price moves into an earnout. Thin or unverifiable earnings and heavy customer concentration are the next two, and all three show up in a quality of earnings review.
How do I value a business for sale without hiring a broker?
Normalize three years of financials, calculate SDE and adjusted EBITDA, apply the published multiple for your size band, then stress test the result against the three value drivers, owner dependency, management team and earnings quality. That gives you a defensible band. A broker or M&A advisor sharpens it with live comparables, and a quality of earnings review is what a buyer will use to test it.
Should I get a formal valuation before deciding to sell?
Yes, and most owners do not. In the Exit Planning Institute's 2025 generational owner readiness research, only 27 percent of baby boomer owners had a formal valuation and 5 percent had a dedicated exit planning team, even though more than half planned to exit within five years. A read on value 12 to 24 months out gives you time to move the number rather than accept it.
How long does it take to sell a business once I know what it is worth?
Plan on six months to a year from engaging an advisor to closing, longer for companies above $2 million where diligence is heavier. The valuation is the fast part. Getting the company to the point where a buyer believes the number, with a management team that can run it and books that survive a quality of earnings review, is what takes the 12 to 24 months before that.
Find out whether you are ready for the exit you are now excited about
You now have the math. Normalize earnings, pick the band, apply the median, then be honest about where the three drivers put you inside it. If it is not the band you hoped for, you also know which three things to work on, and none of them is a bigger marketing budget.
The owners who get the top of the band are the ones who spent two years making themselves unnecessary and could prove it. That is a leadership project with a finance deliverable.
Start with the free part. The leadership and AI readiness assessments take about fifteen minutes and tell you how dependent the company is on you. Then read the exit readiness page, the fixed fee read across leadership, operations and technology for an owner who wants to sell in 12 to 24 months.
What the first conversation looks like
It is a 30 minute call with me. You bring last year's tax return and the one sentence version of why you are thinking about selling. I tell you which earnings line a buyer will price you on, which of the three drivers I think will cost you the most, and whether an exit readiness read makes sense or whether you should simply run the company for two more years and call me then. If the answer is a broker today, I say so.
If we go further, the exit readiness engagement is a fixed fee read on leadership, operations and technology, with Steve on the numbers and Thor on the team, delivered as a written assessment and a 24 month plan you own. The price is quoted per engagement after the first call.
Your first step for tomorrow morning: pull last year's tax return, write down your pre tax profit, your own total compensation, and your three largest customers as a percent of revenue. Three lines. Then take the free assessments and bring both to the exit readiness conversation. That is how you find out how much your business is worth to someone other than you.
