How to Value Your Business for Sale
Most owners hear the word "valuation" for the first time during due diligence. A buyer or their advisor starts throwing around terms like "3x SDE" or "EBITDA multiple," and suddenly you're negotiating based on math you didn't know existed a month ago.
That puts you at a disadvantage. This guide explains how business valuation actually works so you can walk into those conversations prepared.
What "Multiples" Mean and Where They Come From
A valuation multiple is a ratio. Take a financial metric (usually your earnings), multiply it by a number, and you get an estimated business value.
The two metrics you'll hear most often:
SDE (Seller's Discretionary Earnings) is the total financial benefit to a single owner-operator. It includes your salary, your benefits, and any personal expenses the business pays for, on top of the business's operating profit. SDE is the standard for most owner-operated small businesses because it shows what the buyer would actually take home if they ran it themselves.
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) strips out accounting and financing decisions to show operating profit. Buyers use EBITDA when the business has management in place and the owner isn't doing the day-to-day work.
Here's a simple example. If your SDE is $300,000 and comparable businesses in your industry sell at a 3x multiple, your estimated value is $900,000.
How Multiples Are Calculated
Multiples come from real transactions. When a landscaping company with $400,000 in SDE sells for $1.2 million, that's a 3.0x SDE multiple. Do that across dozens of deals in the same industry and you get a median multiple that represents what the market is actually paying.
This is called a "comparable transactions" approach. It's the same logic as looking at recent home sales to figure out what your house is worth. The more relevant transactions you can find, the more reliable the number.
Industry matters a lot here. A SaaS company and a plumbing company with the same SDE will sell for very different amounts because buyers view recurring software revenue differently than service revenue. Typical SDE multiples for small businesses range from 1.5x to 4.5x, but the spread within any industry can be significant.
When Multiples Actually Come Up
Here's what usually happens. You list your business, talk to a few buyers, and one of them makes an offer. The offer might say something like "2.8x trailing twelve months SDE" or it might just be a dollar amount. Either way, it's based on a multiple of your earnings.
During due diligence, the buyer's advisor will scrutinize your financials to confirm the earnings number is real. They'll look at add-backs, one-time expenses, owner perks, and anything that changes the SDE calculation. If the number holds up, the multiple holds up. If the buyer finds things that lower SDE, the price comes down.
This is why owners who understand their own SDE before going to market have a serious advantage. You can identify and explain every add-back before a buyer questions it, instead of scrambling to justify numbers after the fact.
How to Get a Higher Multiple
The single most effective way to increase your multiple is to have more than one buyer at the table. When a buyer knows they're competing with other offers, they pay more. When they're the only one looking, they have every incentive to negotiate you down.
This means the real leverage in a sale comes from market exposure. Getting your business in front of qualified buyers, running a structured process, and creating competition for the deal.
This is exactly what Rejigg does. You list your business, buyers are pre-vetted before they can contact you, and you manage conversations and offers directly through the platform. No broker taking 5-10% of the sale price. You keep control of the process, and you can compare offers side-by-side in the deal dashboard.
More conversations with serious buyers means more offers. More offers means a better price.
Preparing for Due Diligence in Your Industry
Buyers in every industry ask different questions. A buyer looking at a landscaping company cares about seasonal revenue patterns and whether crews would stay after a sale. A buyer looking at a SaaS company cares about churn rates and customer acquisition costs.
Knowing what buyers in your industry will focus on lets you prepare your answers and your documents before you're under the microscope. That preparation shows up in how smoothly diligence goes, and smooth diligence keeps deals on track.
We publish industry-specific guides based on hundreds of real buyer-seller conversations that happen on Rejigg. They cover the exact questions buyers ask, what strong answers look like, and how to prepare. Check out the guides for landscaping and other industries on our owner resources page.
Get a Free Estimate with Our Valuation Tool
We built a free valuation calculator that uses real comparable transaction data to estimate what your business is worth. Here's how it works:
- Enter your financials. Revenue, operating income, owner's compensation, and any add-backs. You can type them in manually, pull from a tax return, or connect QuickBooks to import automatically.
- Select your industry. Pick the NAICS codes that match your business so we can find relevant comparable transactions.
- Get your estimate. We calculate your SDE and EBITDA, pull median multiples from closed deals in your industry, and generate a valuation range you can download as a PDF.
The whole thing takes about ten minutes. No account required, no credit card, completely free.
Get your free valuation estimate
What You Get When You Create an Account
The free tool gives you a solid starting point. When you're ready to go deeper, creating a Rejigg account (also free) unlocks a full valuation platform with the same methods M&A advisors use.
Discounted cash flow modeling. Project your business's earnings six years out with configurable growth rates, discount rates, and replacement salary assumptions. See the present value of each year's cash flow and a terminal value estimate.
Advanced comparable transactions. Filter comps by deal size, date range, and multiple industry codes. Weight individual years differently if your recent performance is stronger. See the actual deals driving your multiples.
Blended valuation. Combine your comps and DCF results with custom weights to arrive at a single number you can defend.
Professional report. A print-ready document covering your financial statements, comp analysis, DCF projections, and final blended estimate. The kind of report you'd normally pay an advisor thousands of dollars to produce.
All of it is free. Start with the valuation calculator and go from there.
Frequently Asked Questions
How do I calculate SDE for my business?
Start with your net operating income from your P&L. Add back depreciation, amortization, interest, your own salary and benefits, and any personal expenses the business covers (vehicle, phone, insurance). The total is your SDE, the most common metric in business valuation. If you connect QuickBooks to Rejigg's free valuation tool, it pulls the numbers automatically.
What's a typical multiple for a small business?
Most owner-operated businesses sell between 1.5x and 4.5x SDE. The exact multiple depends on your industry, growth trends, customer concentration, and how dependent the business is on you personally. The best way to find your industry's range is to look at real comparable transactions, which our valuation calculator does for you.
Should I use SDE or EBITDA for my valuation?
If you're an owner-operator and your salary is a significant business expense, use SDE. It's the standard for valuing a business where the buyer plans to run the operation themselves. EBITDA is more common for larger businesses with a management team in place. Our valuation tool calculates both so you can see the difference.
How can I increase the value of my business before selling?
The two biggest levers are improving your financial documentation and creating competition among buyers. Clean financials with clear add-backs give buyers confidence in the business valuation, which supports a higher multiple. Multiple interested buyers at the table give you negotiating leverage. Preparing for industry-specific due diligence questions helps on both fronts.
Do I need a broker to sell my business?
No. Brokers charge 5-10% of the sale price for work you can do yourself with the right tools. Rejigg gives you everything you need to value and sell your business: buyer vetting, a secure data room, direct messaging, offer comparison, and a free valuation tool. You keep control of the process and keep the broker fee in your pocket.
