A Guide for Determining a Reasonable Price for Your Small Business

By Michael D. Rubin, CEO & Founder · Updated September 2026 · 741 words

A reasonable price starts with recast financial statements, is tested by an independent valuation, and ends as four numbers you decide in advance: the value range, the asking price, the price you hope for, and the lowest price you would accept. The market sets the final figure, but owners who have done this work negotiate faster and better.

Private companies face a particular problem. Unlike public companies, most do not have audited financial statements and publish very little, so buyers start out knowing much less and assume more risk. Your job is to close that gap with information buyers can verify. It can be closed without an audit: clear, consistent, well-supported numbers go most of the way.

Step 1: make the numbers easy to trust

Work with your CPA to produce three years of financial statements that reconcile with your tax returns, plus the current year to date. Then recast them: add back owner perks, one-time costs and above-market owner pay, and adjust anything unusual, so the earnings reflect what a new owner would see. Include a current balance sheet, because buyers price working capital and debt as well as earnings.

Present it clearly. A short summary that walks a buyer from reported profit to adjusted earnings, with each adjustment explained and documented, answers questions before they are asked and removes much of the suspicion buyers bring to private-company numbers. Our list of financial statements needed for a valuation shows what to gather.

Step 2: get an outside view of value

Owners are poor judges of their own company's worth, in both directions. An outside professional, whether an M&A advisor giving an opinion of value or an appraiser preparing a formal business valuation, brings market evidence and removes emotion from the first number. Ask for the reasoning, not just the figure, because you will need it again when a buyer questions your price.

For smaller owner-operated companies, value is often based on seller's discretionary earnings (SDE: profit plus the owner's salary and perks). For larger companies with management in place, buyers use adjusted EBITDA (earnings before interest, taxes, depreciation and amortization). In MDR & Associates' experience, companies with $3 million to $100 million in revenue most often sell for three to seven times adjusted EBITDA. Where a company falls in that range depends on growth, risk and how much it relies on its owner. SDE and EBITDA multiples are not interchangeable, so make sure any comparison uses the same measure.

Step 3: set your four numbers

Deciding these before the first offer keeps you from anchoring on a buyer's number or reacting emotionally in the moment. It also speeds negotiation, because you already know which offers deserve a counter and which deserve a polite no. Revisit the numbers if the business changes materially while it is on the market, in either direction. Our article on how advisors set a realistic asking price goes deeper into this step.

• Value range: the low-to-high range the evidence supports.
• Asking price or price guidance: where you start, backed by evidence you can defend line by line.
• Target price: what you would be pleased to accept, including the terms that come with it.
• Walk-away price: the lowest total you will take, known only to you and your advisor.

What buyers weigh when they price your company

Different buyers weigh these differently, which is one reason competition among several buyers usually produces a better result than a single negotiation. Each factor also points to something you can improve before going to market. Where you can, gather evidence for each: customer lists with tenure, supplier agreements, a capital spending history and a simple growth plan.

• How stable earnings have been, and whether they are growing.
• How broad the customer base is, and how much depends on a few accounts.
• The range of products or services.
• Current competitors and likely new ones.
• Supplier risks and other possible disruptions.
• The health and direction of the market.
• How much capital the business will need to keep growing.

How MDR & Associates sets a price with you

We give a free, confidential opinion of value as a low-to-high range after reviewing three years of financials, and we explain the reasoning behind it. Where formal support is needed, for a partner or a lender, a separate formal valuation is available. Then competition among qualified buyers, not a list price, decides where in that range the deal lands. Start with the free valuation snapshot.

Where this fitsBusiness valuation in Texas →

Questions owners ask next

Should I tell buyers my walk-away price?

No. Your walk-away number is for you and your advisor only; revealing it invites offers at that level. Buyers should see the evidence supporting your value, the recast earnings and the growth story, and then make their best offer in competition with other buyers.

What if two valuations give different numbers?

That is common, because they may use different methods, dates or assumptions. Ask each for the reasoning behind the key adjustments and multiples. The difference often comes down to a few judgment calls, such as which add-backs to accept, and understanding them prepares you for the same debates with buyers.