How Much Is My Business Worth? A 2026 Valuation Guide
The three methods professionals actually use, current market data, and an honest look at where each one misleads you.
What is my business actually worth?
Most small businesses sell for 2 to 3 times seller's discretionary earnings (SDE). In Q2 2026 the average was 2.7x cash flow on a median sale price of $349,250. Revenue multiples averaged around 0.7x. Your actual number depends far more on your industry, how much revenue is recurring, and how dependent the business is on you personally than on any single formula.
- There is no single "correct" value. Professional appraisers run three approaches — income, market, and asset — and look for where they converge.
- For businesses under roughly $1M in earnings, SDE multiples are the working standard. Above that, buyers shift to EBITDA multiples.
- Revenue multiples are the method most people search for and the one professionals trust least. The IRS explicitly rejects rigid rules of thumb in its foundational valuation guidance.
- The gap between methods is large and normal. In the worked example below, the same business values at $418,500 to $813,750 depending on method — a 94% spread.
- A free calculator gives you a negotiating range. It does not give you a defensible valuation for an SBA loan, estate tax filing, divorce, or shareholder dispute — those legally require an independent certified appraisal.
"What is my business worth?" is a question with no single answer, and any tool or broker that hands you one number without showing its work is doing you a disservice. Value depends on who is buying, why they are buying, what they can do with the business that you cannot, and what the market is paying for businesses like yours this quarter.
What you can do — and what this guide walks through — is calculate a defensible range using the three methods professionals actually use, then understand which end of that range your business sits at and why.
Valuation produces an estimate of what a business is worth in theory. Price is what an actual buyer actually pays. In 2025, businesses sold at roughly 94% of asking price — meaning sellers who priced realistically got close to their number, and the negotiation happened mostly before the listing, not after.
The three valuation approaches
Every credible business valuation traces back to the same framework, and that framework is older than most of the people using it. IRS Revenue Ruling 59-60, issued in 1959, remains the foundational standard for business valuation in the United States — cited routinely in estate and gift tax matters, shareholder disputes, divorce settlements, SBA loans, and most M&A work.
It identifies three approaches:
| Approach | What it measures | Best for | Weakness |
|---|---|---|---|
| Income | The present value of future earnings the business will generate | Stable, profitable businesses with predictable cash flow | Highly sensitive to assumptions — small changes in discount rate swing the answer enormously |
| Market | What comparable businesses actually sold for | Businesses in sectors with plenty of transaction data | "Comparable" is doing a lot of work; no two small businesses are truly alike |
| Asset | Book value, financial condition, and the value of intangibles | Asset-heavy businesses, or as a valuation floor | Ignores earning power entirely — a profitable service business has few assets |
"Valuations based solely on revenue multiples are often insufficient for tax-sensitive purposes."
— Interpreting IRS Rev. Rul. 59-60, which explicitly rejects rigid valuation formulas and rules of thumb
That rejection of rules of thumb is worth sitting with, because the entire internet runs on them. The ruling recognised that closely held businesses vary so widely that valuation has to be grounded in the specific facts of the specific business. A multiple is a starting point for a conversation, not an answer.
Method 1: SDE and EBITDA multiples
This is the method that actually governs small business sale prices. You take a normalised earnings figure and multiply it by whatever the market is currently paying for businesses in your sector.
Which earnings figure depends on your size:
- SDE (Seller's Discretionary Earnings) — net profit plus the owner's salary, benefits, and personal expenses run through the business, plus interest, taxes, depreciation and amortisation. Used for owner-operated businesses, typically under about $1M in earnings. It answers: "what would this business put in my pocket if I ran it myself?"
- EBITDA — earnings before interest, taxes, depreciation and amortisation, without adding back an owner's salary. Used for larger businesses that already employ professional management. It answers: "what does this business earn as a standalone asset?"
Every seller wants to add back the company truck, the family phone plan, and that one bad year. Every buyer wants to add back nothing. Aggressive add-backs are the single most common reason a deal that looked agreed at the letter-of-intent stage collapses in due diligence. Add back what you can document and defend, and nothing else.
Work out your earnings figure before applying any multiple — the multiple is worthless if the earnings number is wrong.
Calculate your EBITDAMethod 2: Revenue multiples
A revenue multiple values the business as a percentage of annual sales, ignoring profitability entirely. Across all small businesses the average revenue multiple sits around 0.67x, with a range from roughly 0.42x to 1.2x depending on sector.
It is fast, it requires only one number, and it is the method professionals reach for last. BizBuySell — which aggregates the transaction data most of these multiples come from — notes plainly that for small business valuation purposes, cash flow to the owner is a more reliable indicator than revenue.
The reason is straightforward: two businesses with identical $700,000 revenue can have wildly different earnings, and a buyer is purchasing the earnings. Revenue multiples are most defensible for businesses where margins are tightly clustered across the sector, or for recurring-revenue models where revenue quality is genuinely comparable.
Switch between EBITDA multiple, revenue multiple, and DCF to see how much your estimate moves. No signup, and nothing you enter leaves your browser.
Value your businessMethod 3: Discounted cash flow
Discounted cash flow projects what the business will earn over the next several years, then discounts those future earnings back to what they are worth today. It is the most theoretically rigorous method and the easiest to accidentally abuse.
This is the trap. Hold everything else constant and change only the discount rate on a business earning $155,000 with 5% growth: at 10% you get roughly $3.3M, at 20% roughly $1.1M, at 25% about $814,000, at 30% about $651,000. Same business, same projections — a five-fold swing from one assumption.
Small private businesses are risky, illiquid, and often owner-dependent, so realistic discount rates run 20-30%, not the 8-12% you would use for a public company. Anyone showing you a DCF on a small business with a 10% discount rate is either inexperienced or selling something.
A DCF is only as good as the cash flow figure feeding it. Work out your operating and free cash flow before projecting anything.
Analyse your cash flowWhat 2026 market data shows
Multiples are not theoretical — they are observed from actual closed transactions, and they move. Here is where the US small business market stood through the first half of 2026.
The pattern underneath those numbers matters more than the numbers themselves. Transaction volume fell sharply while prices held steady and multiples actually ticked up — the average cash flow multiple rose 2% year over year to 2.7x. Fewer businesses are selling, but the ones that sell are better businesses commanding firm prices.
| Period | Transactions | Median sale price | Avg cash flow multiple |
|---|---|---|---|
| Full year 2025 | 9,586 | $350,000 | 2.61x |
| Q1 2026 | 2,345 | $350,000 | — |
| Q2 2026 | 2,117 | $349,250 | 2.70x |
The market is rewarding quality over quantity. If your earnings are growing and your revenue is recurring, you are in a stronger position than the falling transaction count suggests. If your margins are compressing, the data says buyers will notice — and the discount will show up in the multiple, not the asking price.
Worked example: one business, three answers
Take a business at the 2026 national median: $692,000 annual revenue and $155,000 in seller's discretionary earnings. Here is what each method produces.
Reading this correctly is the whole skill:
- The SDE multiple ($418,500) is what the market is actually paying for businesses like this right now. It is the most reliable single number here.
- The revenue multiple ($484,400) implies a 3.1x earnings multiple — above the market average, which tells you 0.7x revenue is slightly generous for this margin profile.
- The DCF ($813,750) is the outlier, and it is the one to distrust first. It implies 5.2x earnings, roughly double the market rate. That gap says the growth assumption is optimistic, the discount rate is too low for the risk, or both.
Where three methods disagree this sharply, the honest conclusion is a range of roughly $400,000 to $500,000, anchored on the market data, with the DCF treated as a best case that a buyer would need convincing to accept.
Every figure above was computed in Python against the exact logic in our business valuation calculator before publication, then re-verified against the live tool. Market multiples come from BizBuySell's quarterly Insight Report, the standard public source for US small business transaction data. Where our figures round, we round conservatively.
What moves your multiple up or down
Two businesses with identical earnings can sell for very different amounts. These are the factors that decide which one you are.
| Factor | Pushes multiple up | Pushes multiple down |
|---|---|---|
| Owner dependence | Business runs without you; management team in place | You are the business — customers buy from you |
| Revenue quality | Contracts, subscriptions, recurring maintenance | One-off project work, no repeat guarantee |
| Customer concentration | No customer above ~10% of revenue | One client is 40% of the book |
| Earnings trend | Three years of growth | Flat or declining, however good the excuse |
| Margin stability | Costs pass through to customers | Margins compressing under cost pressure |
| Books quality | Clean, reviewed financials, minimal add-backs | Cash transactions, aggressive add-backs, messy records |
| Transferability | Documented systems, trained staff, assignable contracts | Everything lives in the founder's head |
Most of these are improvable, and most take 12-24 months to improve meaningfully. That is the real argument for valuing your business long before you intend to sell it — not to find out what you would get, but to find out what is costing you.
Margin stability is one of the clearest signals buyers read. See where your gross, operating, and net margins actually sit.
Check your marginsRecurring revenue and low churn command premium multiples. Work out your LTV and CAC to see how your revenue quality reads to a buyer.
Measure customer valueWhen you need a certified appraisal
A calculator gives you a range to think and negotiate with. There are situations where that is genuinely not enough, and it is worth being direct about which.
You need an independent certified valuation when:
- SBA financing is involved. Partial ownership transfers under SBA rules require an independent third-party valuation to establish fair value of the shares being purchased. Your own estimate will not satisfy a lender.
- Estate or gift tax filing. This is the original purpose of Rev. Rul. 59-60, and the IRS evaluates valuations against that standard.
- Divorce or shareholder dispute. Courts expect to see the ruling's framework addressed explicitly in a report.
- Buy-sell agreement triggers. Rev. Rul. 2003-28 addresses how restrictive agreements affect valuation — a genuinely technical area.
Deciding whether selling is worth exploring. Sanity-checking a broker's opinion of value. Setting an internal target before a partner conversation. Understanding how a change in earnings would move your number. For all of these, a transparent calculator you can re-run with different assumptions beats a single number from a form you had to give your email address to.
A research-first finance team. No lead selling, no lender rankings, no affiliate-pulled recommendations. Every guide pairs primary sources (IRS, CFPB, Federal Reserve, CRA) with the free calculators you can run yourself.
Run the numbers yourself
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