01 / The vocabulary
The two measures buyers use.
Nearly every Main Street valuation is a multiple of one number: the annual earnings the business produces for its owner. The disagreement is only over which version of earnings to use.
SDE — seller’s discretionary earnings
The total economic benefit the owner takes out: reported profit plus your salary, personal expenses run through the business, depreciation and genuine one-off costs. Most owner-operated businesses — the Main Street market — are priced on SDE, commonly at a multiple of roughly two to four times depending on the business.
EBITDA
Earnings before interest, tax, depreciation and amortization — with a market-rate manager’s salary taken out rather than added back. Larger deals where the business runs without the owner tend to be priced on EBITDA. If a buyer quotes EBITDA against a business that only makes sense on SDE, the conversation needs slowing down.
02 / The honest shape of an answer
Why a band, not a number.
Two buyers can read the same business and pay different prices, because the multiple is a judgment about risk. A single-page “valuation” quoting one precise figure is a sales pitch; a band with the reasoning written next to it is a negotiating position.
- The bottom of the band is what your documented earnings already prove.
- The top is what the same business is worth to the right buyer once preparation closes the gaps.
- A good valuation read shows you which side of the band you sit on — and why.
03 / Where the money is
What recasting does to the band.
Buyers price what they can verify, not what you remember. Recasting rebuilds your reported profit into earnings a buyer’s diligence will accept: genuine add-backs evidenced against records, owner perks itemized, and the inconsistencies between your figures resolved before someone else finds them.
It works both ways. Recasting usually raises the earnings a buyer will credit — and it also stops a weak file pulling the multiple down. That is why the same business can legitimately widen or tighten its band without a single day of extra trading.
04 / The levers
What moves the band.
Recurring revenue
Contracts, subscriptions and repeat trade are believed more than one-off jobs.
Owner dependence
A business that runs without you earns a higher multiple. One that is you is priced as a job for sale.
Customer concentration
One customer at half your revenue is risk; ten at a tenth each is resilience.
Records quality
Clean, consistent books and provable figures move the multiple up faster than almost anything else.
Trend and runway
Two or three years of stable or growing earnings sell; a declining trend needs a reason a buyer believes.
Staff and systems
People who stay and processes that are written down transfer value. Know-how in one head does not.
05 / The next step
Get your documented read.
The free exit-readiness check asks about the business and what you want from a sale, then gives you a written band with the reasoning beside it — before any buyer, and before you commit to anything.