What Would Your Business Sell For?

By Michael D. Rubin, CEO & Founder · Updated September 2026 · 710 words

For a profitable company with $3 million to $100 million in revenue, a realistic starting estimate is adjusted EBITDA multiplied by a figure that MDR & Associates most often sees between three and seven; smaller owner-operated businesses are usually priced on seller's discretionary earnings instead, at lower multiples. The estimate then has to be adjusted for what the price includes, what it leaves out and how it will be paid.

This article walks through the steps in the order a buyer would take them. The result is an estimate, not a promise; only competing offers from qualified buyers establish a price.

Step one: choose the right earnings measure

Seller's discretionary earnings (SDE) starts with pre-tax profit and adds back depreciation and amortization, interest, one-time and non-operating items, and the full compensation and discretionary perks of one owner who works in the business. It suits smaller companies where the buyer will step into the owner's job and live on what the business pays.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) makes similar adjustments but assumes the buyer pays a market salary to whoever runs the company. It suits larger businesses with a management team, which describes most companies in the $3 million-plus revenue range. Our answer on whether to value your company using EBITDA, SDE, revenue or comparable transactions compares them in detail.

Step two: build the earnings figure carefully

Many owners run their bookkeeping in a way that works for them and nobody else. That is fine until a buyer needs to see real profit. Start from financial statements that reconcile to your tax returns, then list each adjustment: owner pay above or below market, personal expenses, one-time costs, rent paid to a property you own. Each adjustment must be something a buyer can verify.

Use three years of results and the current year to date. Buyers look at the trend as well as the level, and a single strong year rarely carries the price on its own.

Step three: judge where your multiple sits

Rate your company honestly on the factors buyers use to set the multiple. The more strong ratings, the higher your position in the range:

• How long the company has operated profitably under the current owner.
• Whether you would finance part of the price, which widens the buyer pool.
• How intense local and national competition is.
• How risky the business is by nature: contract terms, cyclicality, regulation.
• Whether revenue and profit are trending up or down.
• The condition and suitability of the location and facilities.
• How much buyers currently want companies of your type.
• Whether the wider industry is growing or shrinking.
• How easily a competitor could copy what you do.
• How deep your management is and how spread out your customers are.

Step four: understand what the price covers

A price built from earnings and a multiple usually covers the operating business: equipment, fixtures, vehicles, goodwill and a normal level of working capital, meaning receivables and inventory less payables. Real estate is usually handled separately, either sold at its own value or leased to the buyer. Most companies of this size sell cash-free and debt-free: you keep the cash and pay off debt from the proceeds. Smaller transactions sometimes treat inventory as an extra item on top of the price.

Then comes the difference between the price and what you receive. Our answer on enterprise value versus the amount received at closing shows how debt, working capital, deferred payments and escrow change the figure.

Asking price, selling price and fair value

An old piece of advice among intermediaries still holds. The asking price is what the seller hopes for. The selling price is what the seller receives. Fair value is where the most a buyer will pay meets the least a seller will accept. The job of a sale process is to move that meeting point up by putting several qualified buyers in competition, so no single buyer sets it alone.

How we estimate it with you

MDR & Associates provides a free, confidential opinion of value, a low-to-high range, after reviewing three years of financials, with the reasoning behind each end. For a formal written report, see our business valuation service. For a first estimate in minutes, request a free valuation snapshot.

Where this fitsBusiness valuation in Texas →

Questions owners ask next

Why do small businesses sell for lower multiples?

They carry more risk: fewer customers, more dependence on the owner, less management depth and thinner records. SDE-based prices also include the owner's pay in the earnings figure, so the multiple is applied to a larger base. The two kinds of multiple are not directly comparable.

Does inventory add to the sale price?

It depends on the deal. In most lower-middle-market sales, inventory is part of the working capital left in the company, already reflected in the price. In some smaller transactions it is counted and paid for separately at closing. Confirm the treatment in the letter of intent.