What Is My Business Worth? How to Value a Small Business in 2026

Most small businesses are worth a multiple of their yearly profit, not their revenue. The quick formula is Value = SDE x a multiple, where SDE (seller's discretionary earnings) is the real profit the business puts in the owner's pocket, and the multiple for a typical Main Street business usually lands somewhere around 2 to 3.5 times ~ higher for larger, cleaner, less owner-dependent businesses, lower for small or fragile ones.

Here is how to work out your own number, and what moves it up or down.

The 30-second version

• Start with your SDE: net profit, plus the owner's salary, plus one-time and personal expenses run through the business.
• Multiply by a market multiple for your size and industry (often 2~3.5x for small businesses).
• Value = SDE x multiple. A business with $200,000 SDE at a 3x multiple is worth about $600,000.
• Revenue matters far less than profit. A $1M-revenue business can be worth less than a $400k-revenue one if it barely makes money.

What is SDE, and how do I calculate it?

SDE is what a buyer really cares about: the total financial benefit of owning the business, run by one working owner. To calculate it, start with net profit on your tax return, then add back:

• The owner's salary and any owner benefits.
• One owner's worth of personal or discretionary spending run through the business.
• One-time expenses that will not repeat (a lawsuit, a one-off equipment write-off).
• Non-cash items like depreciation and amortization.
• Interest, since a new owner will finance the business differently.

These "add-backs" are why a business that shows almost no profit on paper can still be worth a healthy sum ~ the profit was being spent, not lost. Buyers scrutinize add-backs closely, so keep them documented and defensible.

Revenue multiple vs SDE multiple: do not confuse them

This is the single most common mistake owners make. A revenue multiple (price divided by sales) is usually a small fraction ~ often 0.3 to 0.8 for a service business. An SDE multiple (price divided by profit) is usually 2 to 3.5. They describe the same sale price from different angles, so quoting a "3x" revenue multiple when you mean SDE can overstate your value by several times. When someone tells you a multiple, always ask: a multiple of what?

What moves your multiple up or down?

Two businesses with identical profit can sell for very different prices. The multiple is really a risk score. It goes up when the business is safer and easier to hand over, and down when it is fragile or depends on you.

The multiple is really a risk score. It rises when the business is safe and easy to hand over, and falls when it depends on you.

SharePop Studio

Raises your multiple:

• Recurring or contracted revenue ~ predictable income is worth more than one-off jobs.
• The business runs without the owner ~ a trained team and documented systems.
• A diversified customer base ~ no single client is a large share of sales.
• Clean, reviewed financials ~ a buyer can trust the numbers.
• A credible growth story ~ a clear reason revenue keeps climbing.

Lowers your multiple:

• Owner dependence ~ if it stops when you leave, a buyer is buying a job.
• Customer concentration ~ one client at 40% of revenue is a silent value killer.
• Messy books ~ if the numbers cannot be trusted, the price gets discounted.
• Declining or lumpy revenue.

A worked example

Say your home-services business shows $60,000 of net profit on the tax return. You pay yourself an $90,000 salary, run about $20,000 of personal expenses through the business, and had a one-time $10,000 legal bill. Your SDE is roughly $60,000 + $90,000 + $20,000 + $10,000 = $180,000.

At a 2.5x multiple (a fair starting point for a solid but owner-run business) that is about $450,000. Reduce your owner dependence and lock in recurring contracts, push the multiple to 3.2x, and the same profit is now worth about $576,000 ~ a $126,000 swing from de-risking the business, not from earning a dollar more.

How do I increase what my business is worth before selling?

You raise value two ways: grow the SDE, or raise the multiple. The multiple is usually the faster lever.

• Build recurring revenue and get key customers onto contracts.
• Reduce owner dependence: document systems and train a second in command.
• Break up customer concentration so no client dominates.
• Clean up the books at least two years before you plan to sell.
• Track the handful of numbers a buyer will ask about, every month.

Knowing your number today, and which lever moves it most, is the difference between guessing and planning. SharePop Studio gives owners and their advisors a sourced valuation plus the specific moves that raise it, so you can watch the number change as you fix the business.