What Your Business Would Likely Sell For Today

Joe Lau
Jan 23
4 min read

Most owners have “a number” in their head.

It usually comes from:

What they want to get
What a buddy sold for
Some rule of thumb they heard at a conference

Rarely does it come from how serious third‑party buyers actually look at a $1–5M, owner‑dependent business.

My goal here is simple: give you a back-of-the-napkin way to reality‑check your number so you’re making decisions based on how buyers think, not hope.

You’ll get:

A simple 3‑part model for how buyers price your business
A quick way to ballpark your likely sale range today
The common mistakes that cause owners to dramatically over (or under) estimate what they’d get

Use this as a lens, not a formal valuation. It’s designed to get you “roughly right” so you can decide what to do next.

How Serious Buyers Actually Think

At this size, almost every legitimate buyer is really buying three things:

Cash flow
Risk
Deal structure

You can think of it like this:

Likely Sale Price ≈ Normalized Earnings × Multiple ± Deal Structure

Let’s break each piece into plain English.

Step 1: Get to your “real” earnings

Most $1–5M, owner‑dependent businesses don’t run clean EBITDA. Buyers know that. So they start with your normalized earnings, usually:

SDE (Seller’s Discretionary Earnings) for very owner‑run companies, or
EBITDA once there’s more of a team and cleaner books.

Roughly, this means:

Start with net profit
Add back:
- Your own salary/comp
- One‑time or clearly non‑recurring expenses
- Personal stuff running through the business that a buyer wouldn’t continue

You don’t need it perfect. You just need a tight estimate of:

“If a buyer owned this, how much cash would it throw off for them in a normal year?”

Call that number your normalized earnings.

Step 2: Apply a realistic multiple

Next, buyers ask: “How repeatable and low‑risk is that cash flow?” That judgment shows up in the multiple they’re willing to pay.

Very simply:

Higher multiple if:
- Revenue is diversified (not 3 customers)
- The business can run without you glued to it
- Financials are clean and believable
- There’s clear, realistic growth ahead

Lower multiple if:
- You are the rainmaker / key operator
- There’s customer or supplier concentration
- Messy books, commingled expenses, weak reporting
- No obvious growth story a buyer can underwrite

Two similar companies with the same earnings can have wildly different values because one feels safer and more scalable. That’s value: the gap between what something is worth to the buyer vs what they pay.

For now, the point isn’t to pick the “perfect” multiple. It’s to force yourself to say:

“On a scale from ‘key‑person job’ to ‘transferable asset,’ where am I really?”

Then be honest and pick a low / mid / high multiple in the typical band for your size and industry. That gives you a range, not a fantasy point.

Step 3: Adjust for deal structure

Headline price is one thing.

How you get paid is another.

Buyers blend:

Cash at close
Seller note (you’re the bank for a slice)
Earn‑out (future payments if targets are hit)
Sometimes equity roll‑over

Two offers might both say “$3M,” but:

Offer A: $3M all cash at close
Offer B: $1.5M at close, $1M seller note, $500K earn‑out

Same sale price. Completely different reality.

When you think “what would my business likely sell for today,” you want to be thinking in terms of:

Likely total price range and a realistic cash‑at‑close expectation, given your current risk profile.

Owner‑dependence, messy numbers, and perceived risk tend to push more of your payout into earn‑outs and notes.

A Quick Back‑of‑the‑napkin Exercise

Grab a pen and do this:

Estimate normalized earnings (SDE or EBITDA)

Take last year’s profit
- Add back your comp + clear personal / one‑time expenses
- Write down the number: Normalized earnings = $________
Rate your risk honestly (1–5)
- 1 = “If I get hit by a bus, this breaks”
- 5 = “Business runs fine without me; I’m a nice‑to‑have”
Pick a low / mid / high multiple band that feels honest for your rating
- Lower risk score → lower band
- Higher risk score → higher band
Multiply
- Low end = normalized earnings × low multiple
- High end = normalized earnings × high multiple

What you get is a likely valuation range today, not a brochure number.

Common Valuation Traps Owners Fall Into

A few patterns I see over and over:

Using revenue multiples casually
Revenue multiples can be useful in certain industries and deal types, but most small, owner‑dependent businesses are bought on earnings and risk, not top‑line bragging rights.
Copying a friend’s deal
“My buddy sold for 5x” leaves out:
- Was it 5x revenue or earnings?
- Over how many years?
- How much was actually cash at close?
You rarely get the whole story, but you anchor your expectations to it anyway.
Ignoring owner‑dependence
If you are the key salesperson, strategist, and firefighter, buyers see a huge execution risk. That almost always shows up as a lower multiple and/or more earn‑out.
Confusing “what I need” with “what it’s worth”
Your after‑tax “freedom number” matters for your life decisions. It does not, by itself, determine what a buyer will pay. Value is driven by their dream outcome and perceived likelihood of success with your business, not your goals.

What To Do With Your Number

Once you’ve got a rough range:

Compare it to your after‑tax freedom number
Ask: “If I sold today in that range, would I be at peace?”
- If yes, that points one way
- If no, you’ve just discovered your valuation gap and the question becomes:
  “Is it worth fixing the business before I sell?”

That’s what the rest of my work is about: reducing owner‑dependence, cleaning the numbers, and de‑risking the business so that buyers are willing to pay more, on better terms, in a shorter time frame.

If you want to take this a step further:

Start with the 5‑Minute Exit Readiness Scorecard to see how a buyer would score your current risk profile.
Then, when you’re ready, we can walk through your specific numbers together on a Valuation Gap Call and turn this rough range into an actionable plan.