What’s Your Business Worth? A No-BS Guide to Valuation for Small Business Owners

If you don’t know what your business is worth, you don’t really know what you’re building.

Whether you're dreaming of selling your business one day, bringing in a partner, applying for a loan, or just trying to see how far you've come, understanding business valuation is non-negotiable. Yet, most small business owners avoid this like the plague—either because valuation for small business it feels too complicated or because they’re scared of the answer.

Here’s the truth: You don’t have to be a financial wizard to grasp valuation. You just need a solid framework, a little reality check, and a willingness to look under the hood.

This guide is your crash course on business valuation.

Why Valuation for Small Business Actually Matters

You probably didn’t start your business to crunch numbers. You had a vision, a product, a hustle—and you went for it.

But here's what happens when you ignore your business's value:

• You undervalue yourself when it’s time to sell or pitch to investors.

• You overestimate your worth and make bad decisions.

• You lose out on real growth opportunities because you don’t know your true financial standing.

Valuation isn’t just about dollars. It’s about clarity, strategy, and long-term power moves.

What Affects Your Business's Value?

Business value isn’t just revenue or profit. It’s a cocktail of factors, including:

• Net income (profit)

• Revenue trends

• Customer base and loyalty

• Brand reputation

• Market position

• Scalability

• Systems and processes

• Owner dependence (a big one)

• Tangible and intangible assets

• Industry norms

Here’s a fact that surprises a lot of business owners: It’s not what you think your business is worth—it’s what someone else is willing to pay for it. But knowing how that price is determined gives you leverage.

The Most Common Valuation Methods (And How to Use Them)

1. SDE (Seller’s Discretionary Earnings) – The Small Business Gold Standard

This method starts with your net profit, then adds back any “owner perks” (salary, car lease, one-time expenses). Why? Because those expenses would disappear (or change) under new ownership.

Formula: SDE = Net Profit + Owner’s Salary + Discretionary Expenses

Once you have SDE, you apply a multiple—typically between 1x and 4x depending on your industry, growth, risk, and how replaceable you are as the owner.

Example: If your SDE is $150,000 and your industry multiple is 2.5x, your business might be worth $375,000.

This is the go-to method for businesses under $5M in revenue.

2. EBITDA (Earnings Before Interest, Taxes, Depreciation & Amortization)

EBITDA is used more often with larger businesses, especially those with investors or more complex finances.

Formula: EBITDA = Net Profit + Interest + Taxes + Depreciation + Amortization

You then apply a multiple (usually between 4x and 10x).

Why use EBITDA? It strips out variables so you can compare apples to apples. But for most small businesses, SDE is more relevant unless you're trying to attract larger institutional buyers.

3. Asset-Based Valuation

This one’s simple math: what are your business’s physical and financial assets worth, minus its liabilities?

Formula: Business Value = Total Assets – Total Liabilities

It’s often used for companies with lots of inventory, equipment, or property (think manufacturing, retail, real estate) or for liquidation scenarios.

The downside? It ignores cash flow, brand value, and growth potential. So if your business is more service-based or digital, this likely undervalues you.

4. Market Comparison

Just like real estate comps, this method looks at what similar businesses in your industry and location have sold for recently.

Sounds great—but there’s a catch: reliable data is hard to find, and no two businesses are exactly the same.

Still, it’s a good way to gut-check your valuation:

• Are other businesses your size and type selling for 2x SDE? 4x?

• Are you above or below the average?

Owner Dependency: The Silent Killer of Business Value

Want to tank your valuation fast? Build a business that completely depends on you.

If you are the product, the brand, the customer service, the sales, and the operations—your business isn’t really sellable. It’s just a very demanding job.

Even if you never plan to sell, this matters. Because:

• You’ll never scale

• You’ll burn out

• And the second you get sick, it all falls apart

Fix this by:

• Building systems

• Documenting processes

• Delegating (for real)

• Creating a brand that lives beyond your name

Valuation Isn’t Just for Exits

A lot of small business owners only think about valuation when they’re ready to sell. That’s a mistake.

Here’s when else it matters:

• Taking on investment or a partner

• Buying out a co-founder

• Securing financing or lines of credit

• Estate planning

• Mergers or acquisitions

• Tracking growth over time

Valuation gives you options. And in business, options = power.

Boosting Your Business’s Value

Now that you know what affects valuation, here’s how to raise it—even if you’re not selling anytime soon:

1. Increase your profitability – Duh.

2. Diversify your revenue – Fewer customer concentrations = less risk.

3. Document systems – Show your business runs without you.

4. Strengthen your brand – Reputation adds serious value.

5. Grow your email/customer list – That’s an asset.

6. Nail your financials – Clean, accurate books = investor confidence.

7. Hire and train well – A strong team makes your business more buyable and more scalable.

How to Get a Valuation Done

You’ve got a few options:

• DIY: Use tools like BizEquity, ExitAdviser, or even your own spreadsheets to estimate.

• CPA or Business Broker: They’ll give you a professional analysis (usually $1K–$5K).

• Certified Appraiser: Required for legal situations like divorce, estate disputes, etc.

For most small businesses, a solid ballpark using SDE and industry multiples is a great place to start. You don’t need perfection—you need clarity.

Final Word: Your Business is an Asset—Treat It Like One

Too many small business owners grind for years, only to realize they’ve built something they can’t sell, scale, or even step away from.

That’s not freedom. That’s a prison.

Valuation is your reality check—but also your roadmap. It helps you see what you’re really building, what it’s worth, and how to make it better.

So don’t wait until you’re ready to exit to care. Start now. Know your numbers. Know your worth. And build a business that pays you—now and later.

Need help figuring out what your business is worth or how to increase its value? Our consulting arm, Bowdel Consulting, offers the support you need. Let’s connect.