How Much Is My Business Worth?
A Business Broker’s Honest Answer
By Ramzi Daklouche, Managing Partner | VR Business Sales Atlanta
The value of your business is primarily determined by its Seller’s Discretionary Earnings (SDE) or EBITDA, multiplied by an industry-specific multiple that typically ranges from 2x to 4x for main street businesses and 3x to 6x for lower middle market companies. The multiple depends on factors like recurring revenue, owner dependency, industry trends, customer concentration, and growth trajectory. A professional business valuation from an experienced M&A advisor like the team at VR Business Sales Atlanta analyzes all of these factors against current market comparables to arrive at a defensible asking price that attracts qualified buyers while maximizing your proceeds.
That’s the textbook answer. Now let me tell you what’s really going on.
What Is SDE and Why Does It Matter More Than Net Profit?
If you’ve looked at your tax return and thought “my business only makes $80,000 a year, who would buy that?” you’re thinking about it wrong. Buyers don’t look at net profit on your tax return. They look at Seller’s Discretionary Earnings, which is a recasted number that adds back your salary, benefits, one-time expenses, personal expenses run through the business, depreciation, amortization, and interest.
Here’s a real-world example. A business owner comes to VR Business Sales Atlanta thinking his business is worth maybe $200,000 because that’s roughly what his tax return shows in net income. After a proper SDE recast, the business actually generates $385,000 in total economic benefit to the owner. At a 2.5x multiple, that business is worth closer to $960,000.
SDE is the standard valuation metric for owner-operated businesses with less than roughly $1 million in earnings. Once a business generates more than that, or has a management team that runs it without the owner, the valuation shifts to EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), which doesn’t add back the owner’s salary because the buyer will need to pay a manager to replace the owner.
The distinction matters enormously. Using the wrong earnings metric is one of the fastest ways to either underprice your business or set an asking price that scares away every serious buyer.
How Multiples Work in the Real World
A multiple is just a shorthand way of expressing how many years of earnings a buyer is willing to pay for upfront. A 3x multiple means the buyer is paying three years’ worth of the business’s earnings to acquire it. But here’s what most people miss: multiples aren’t arbitrary numbers pulled from a chart. They’re a reflection of risk.
The lower the perceived risk to a buyer, the higher the multiple they’ll pay. The higher the risk, the lower the multiple. Every factor in a business valuation ultimately maps back to this simple equation.
At VR Business Sales Atlanta, the team evaluates businesses across the Atlanta metro area, including Fulton, Cobb, DeKalb, Gwinnett, and surrounding counties, across virtually every industry. Here’s what typical multiples look like in real transactions:
Main street businesses valued between $300K and $1M mostly trade between 2.0x and 3.5x SDE. A well-run dry cleaner with stable revenue might command 2.0x. A home services company with recurring maintenance contracts might get 3.5x.
Lower middle market businesses valued between $1M and $11M typically trade between 3.0x and 6.0x EBITDA. An IT managed services provider with contracted recurring revenue might command 5x to 6x. A specialty manufacturing company with a concentrated customer base might trade at 3x to 4x.
The Atlanta market specifically has been favorable for sellers in recent years, driven by population growth, a strong entrepreneurial ecosystem, and significant buyer demand, particularly from relocating professionals and private equity groups looking at the Southeast.
The Five Factors That Move Your Multiple Up or Down
Not all businesses earning the same SDE are worth the same price. Here’s what separates a 2x business from a 4x business.
The first is revenue quality and recurrence. A business with contracted, recurring revenue is worth dramatically more than one that starts from zero every month. Subscription models, maintenance contracts, retainer agreements. If 70% of your revenue renews automatically, buyers will pay a premium because the risk of revenue collapse after the sale is low. At VR Business Sales Atlanta, some of the highest multiples we’ve seen have been for service businesses with strong recurring revenue components.
The second is owner dependency. If the business falls apart without you, that’s a problem. Buyers are buying the business, not hiring you forever. A business that runs through systems, documented processes, and a capable management team is worth significantly more than one where the owner is the head salesperson, lead technician, and only customer relationship. Reducing owner dependency is the single highest-ROI activity a seller can undertake before going to market.
Third is customer concentration. If one customer represents more than 15 to 20 percent of your revenue, it creates a risk that depresses your multiple. What happens if that customer leaves after the sale? Buyers and their lenders both scrutinize customer concentration heavily. Diversified revenue across many customers is safer and commands a higher price.
Fourth, industry and growth trends. Businesses in growing industries naturally command higher multiples than those in declining ones. A cybersecurity firm in Atlanta is going to get a much stronger multiple than a print shop, even if they generate the same SDE. The trajectory matters as much as the current number.
Fifth is financial documentation quality. This one surprises people, but it shouldn’t. A business with clean, professionally prepared financial statements, three years of consistent tax returns, and well-organized records signals credibility and reduces perceived risk. A business with messy books, cash transactions, and inconsistencies creates doubt. And doubt always lowers the price.
Why Online Valuation Calculators Get It Wrong
Let me be direct about this. The free online valuation calculators you find through a Google search are essentially useless for making real business decisions. They ask you for revenue and maybe net income, apply a generic industry multiple, and spit out a number. They don’t account for SDE recasting, owner add-backs, local market conditions, deal structure, asset values, customer concentration, growth trends, or any of the factors that actually determine what a buyer will pay.
The danger isn’t just that they give you a wrong number. It’s that they give you false confidence. A seller who believes their business is worth $1.2 million based on an online calculator, when it’s actually worth $800,000, will overprice the listing, sit on the market for months, and eventually sell for less than they would have if they’d priced it right from the start.
At VR Business Sales Atlanta, every valuation is built from the ground up using actual financial data, comparable transaction databases, and the team’s direct experience closing deals in similar industries across metro Atlanta. It’s not a formula. It’s an analysis.
What a Professional Business Valuation Actually Looks Like
When VR Business Sales Atlanta conducts a business valuation, the process typically involves several key components.
It starts with a thorough review of three years of tax returns, profit and loss statements, and balance sheets. This establishes the financial baseline and identifies trends. Is the business growing, flat, or declining?
Next comes the SDE or EBITDA recast. This is where the broker identifies and adds back all discretionary expenses, one-time costs, personal expenses, and non-cash charges to arrive at the true economic benefit the business generates. This step alone can change the valuation by 50% or more compared to what the tax return shows.
Then there’s the comparable transaction analysis. VR’s national network provides access to a proprietary database of completed transactions across the country, allowing the team to benchmark your business against similar businesses that have actually sold. Not theoretical valuations, but real deals with real buyers at real prices.
Finally, a qualitative assessment of the risk factors. Owner dependency, customer concentration, competitive position, industry outlook, lease terms, employee stability, and operational systems. These factors determine where within the multiple range your business falls.
The result is a defensible valuation that serves as the foundation for your asking price. High enough to maximize your proceeds but realistic enough to attract serious, qualified buyers.
When Is the Right Time to Get a Valuation?
Most business owners wait until they’re ready to sell before getting a valuation. That’s a mistake. The best time to get a professional valuation is 2 to 3 years before you plan to exit.
Here’s why. A valuation doesn’t just tell you what your business is worth today. It tells you what’s driving the value and what’s holding it back. Armed with that information, you have time to make changes that directly increase the price you’ll receive when you do sell. Reduce owner dependency. Diversify your customer base. Lock in a favorable lease. Clean up your financial records. Build recurring revenue. Every one of these improvements shows up in a higher multiple and a higher SDE, which compounds into a significantly higher sale price.
VR Business Sales Atlanta offers a complimentary initial business valuation consultation. There’s no commitment to sell, no pressure, and no fee. It’s a conversation about where your business stands today and what you could do to maximize its value when the time comes. Whether you’re thinking about selling next year or in five years, knowing your number is the first step.
Frequently Asked Questions
What is the difference between SDE and EBITDA?
SDE (Seller’s Discretionary Earnings) adds back the owner’s total compensation and personal benefits to the business’s net income, along with other discretionary and non-cash expenses. It’s the standard metric for owner-operated businesses. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) does not add back the owner’s salary because it assumes a professional manager will be paid to run the business. EBITDA is typically used for larger businesses or those with management teams already in place. Most businesses valued under $1 million in annual earnings use SDE. Above that threshold, EBITDA becomes more common.
How long does a professional business valuation take?
A thorough professional business valuation typically takes 1 to 3 weeks, depending on the complexity of the business and the quality of the financial documentation provided. VR Business Sales Atlanta can often provide a preliminary opinion of value within a few days and a comprehensive valuation within two weeks, assuming the seller provides tax returns, P&L statements, and supporting documentation promptly.
Do I need a certified business appraisal to sell my business?
In most cases, no. A certified business appraisal (conducted by an ASA or ABV credentialed appraiser) is typically only required for legal proceedings, estate planning, partnership disputes, or IRS-related matters. For the purposes of listing and selling your business, a broker’s opinion of value backed by comparable transaction data and thorough financial analysis is the standard approach. If your specific situation requires a formal appraisal, VR Business Sales Atlanta can refer you to qualified appraisers in the Atlanta area.
What documents do I need for a business valuation?
At minimum, you’ll need three years of federal tax returns (both business and personal if a pass-through entity), three years of year-end profit and loss statements, a current balance sheet, a list of assets included in the sale, and your current lease agreement. Additional documents that improve valuation accuracy include interim financial statements for the current year, accounts receivable and payable aging reports, a customer revenue breakdown, and any existing contracts or agreements that generate recurring revenue.
How do Atlanta market conditions affect my business value?
Atlanta is one of the strongest M&A markets in the Southeast, driven by population growth (metro Atlanta adds roughly 60,000 to 70,000 people annually), a diverse economy, relatively business-friendly state regulations, and strong buyer demand from both local entrepreneurs and out-of-state relocators. These factors generally support healthy multiples and competitive deal terms for sellers across most industries. VR Business Sales Atlanta tracks local market conditions monthly and incorporates current buyer demand data into every valuation.
Ramzi Daklouche is the Managing Partner of VR Business Sales Atlanta, specializing in main street and lower middle market M&A advisory for businesses valued between $300K and $11M. He co-hosts the podcast “Transitions with Claudia and Ramzi” covering business sales, acquisitions, and ownership transitions. Contact VR Business Sales Atlanta for a complimentary business valuation consultation.
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