If you’ve ever Googled “how to value a small business,” you’ve probably seen a dozen different methods, most of them explained in language designed to make you feel like you need an MBA to understand.
You don’t. Let’s break it down.
The three methods that matter
For most small businesses — the kind with revenue under $10M — there are really three valuation approaches worth understanding.
Earnings multiples are the most common. Take your annual profit (usually measured as SDE or EBITDA), multiply it by a number that reflects your industry, size, and growth trajectory. That number is typically between 2x and 5x for small businesses. A profitable plumbing company might sell for 2.5x earnings. A fast-growing SaaS tool might command 5x or more.
Asset-based valuation adds up everything the business owns and subtracts what it owes. This matters most for businesses with significant physical assets — real estate, equipment, inventory. For service businesses, it’s usually less relevant.
Revenue multiples are sometimes used for businesses that aren’t yet profitable but have strong top-line growth. This is more common in tech, and the multiples vary wildly.
What actually drives the number
The multiple is where things get interesting. Two businesses in the same industry with the same revenue can sell for very different prices. The difference comes down to factors like how dependent the business is on the owner, how recurring the revenue is, whether the customer base is concentrated or diversified, and how clean the financials are.
These aren’t abstract concerns — they’re the things buyers look at first.
The bottom line
Knowing your number isn’t about putting a price tag on your life’s work. It’s about having the information you need to make a good decision — whether that’s selling now, making changes to increase value, or simply understanding where you stand.
That’s what Owners Club is built to help with.