{"id":4510,"date":"2026-06-20T18:00:46","date_gmt":"2026-06-20T18:00:46","guid":{"rendered":"https:\/\/amerivestgroup.com\/?p=4510"},"modified":"2026-06-20T21:35:21","modified_gmt":"2026-06-20T21:35:21","slug":"what-is-my-business-worth","status":"publish","type":"post","link":"https:\/\/amerivestgroup.com\/en\/what-is-my-business-worth\/","title":{"rendered":"What Is My Business Worth? A Plain-English Guide to Business Valuation"},"content":{"rendered":"\t\t
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What Is My Business Worth?<\/h1>\t\t\t\t<\/div>\n\t\t\t\t
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A Plain-English Guide to Business Valuation \u2014 Understanding what your business is worth, and how that number is calculated, is the single most important thing a business owner can know before going to market.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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For Sellers  •  Business Valuation  •  6 Min Read<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t

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Understanding what your business is worth, and how that number is calculated, is the single most important thing a business owner can know before going to market.<\/em><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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I. Introduction<\/h2>\t\t\t\t<\/div>\n\t\t\t\t
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The Number in Your Head vs. What the Market Will Pay<\/h3>\t\t\t\t<\/div>\n\t\t\t\t
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Ask most business owners what their company is worth and they’ll give you a number. It might be based on what they need to retire, what a competitor sold for, or simply a gut feeling built over years of hard work.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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But here’s the reality: what you think your business is worth and what a buyer will actually pay are often two very different numbers.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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Business valuation is not a guess. It follows a defined methodology based on earnings, risk, market conditions, and buyer demand. Understanding how that process works, before you go to market, is one of the most valuable things you can do as a seller.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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II. How Businesses Are Valued: The Core Method<\/h2>\t\t\t\t<\/div>\n\t\t\t\t
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It All Comes Down to Earnings and Risk<\/h3>\t\t\t\t<\/div>\n\t\t\t\t
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The most common way small and lower-middle-market businesses are valued is through an earnings-based approach. A buyer \u2014 or their lender \u2014 looks at how much money the business consistently produces and applies a multiple to arrive at a value.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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The formula is straightforward: Adjusted Earnings \u00d7 Multiple = Business Value<\/strong><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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But both variables \u2014 the earnings number and the multiple \u2014 require careful analysis. Getting either one wrong leads to a mispriced business, which either sits on the market too long or leaves money on the table.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t

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Key Point:<\/strong> Buyers don’t pay for what you’ve put into the business \u2014 they pay for what they expect to get out of it.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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III. Step One: Calculating Adjusted Earnings (SDE or EBITDA)<\/h2>\t\t\t\t<\/div>\n\t\t\t\t
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Why Tax Returns Don't Tell the Whole Story<\/h3>\t\t\t\t<\/div>\n\t\t\t\t
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Business owners often minimize taxable income on their returns. While this is smart for taxes, it makes the business look less profitable than it really is to a buyer. That’s why brokers and buyers use adjusted earnings<\/strong> \u2014 also called Seller’s Discretionary Earnings (SDE)<\/strong> for owner-operated businesses, or EBITDA<\/strong> for larger companies with management teams.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

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Adjustments are made to “add back” items that won’t transfer to a new owner, including:<\/p>