Published: September 19, 2026
One of the first questions every business owner asks when they start thinking about selling is, "What is my business actually worth?" It is a fair question and a complicated one. The answer depends on your industry, your financials, your lease, your customer base, and a dozen other factors. But the process of getting to that number follows a clear framework. Here is how it works.
Most business owners only think about valuation when a sale is on the table. But knowing what your business is worth is one of the most important numbers in your financial life. It affects your retirement planning, your ability to bring in partners, your insurance coverage, and your negotiating power if someone approaches you with an unsolicited offer. Getting a handle on it now puts you in control later.
There are three standard methods used by business brokers, appraisers, and buyers. Most valuations consider all three and look for where they converge.
This is the most common method for owner-operated businesses under about $5 million in revenue. It works the same way a real estate appraisal works: you compare your business to similar businesses that have recently sold and apply a pricing multiple to your earnings or revenue.
The key metric here is Seller's Discretionary Earnings, or SDE. SDE is calculated by taking your pre-tax net income and adding back your salary, personal benefits, non-cash expenses like depreciation, and any one-time or non-recurring expenses. What you end up with is the total economic benefit a new owner-operator would receive from the business.
Once you have your SDE, you multiply it by an industry-specific multiple. In 2026, SDE multiples for small businesses generally run from 1.5x to 4.5x, with an overall average around 2.6x to 2.7x. The exact multiple depends heavily on your industry, your business size, your financial history, and how attractive the business looks to a buyer.
Example: If your business generates $200,000 in SDE and your industry average multiple is 2.5x, your market-based valuation is $500,000.
This method values the business based on its ability to generate future cash flow. It is most useful for larger businesses with consistent, predictable earnings. The two main tools are the Discounted Cash Flow method (which projects future earnings and discounts them to present value) and the Capitalization of Earnings method (which divides a normalized year of earnings by a capitalization rate).
For most small businesses in the Triangle, the income approach is used as a supporting method rather than the primary one. It becomes more central as businesses grow and earnings become more predictable and documented.
This method calculates the fair market value of everything the business owns (equipment, inventory, real estate, intellectual property) minus what it owes. It is primarily used for asset-heavy businesses like manufacturing or equipment companies, or for businesses that are not generating strong cash flow where the asset value is the primary driver.
For most profitable, operating small businesses, the asset approach sets a floor on valuation, not the primary number.
Two businesses with identical SDE can have very different valuations depending on these factors.
Buyers pay more for businesses with organized, verifiable books going back at least three years. Messy records create perceived risk, which reduces your multiple.
If the business cannot run without you personally, buyers discount the price. A strong team, documented systems, and transferable customer relationships command a higher multiple.
If one or two customers make up 40% or more of your revenue, that is a red flag. Buyers want diversified revenue streams.
Businesses with predictable, recurring income (contracts, subscriptions, repeat customers) are worth more than those dependent on constant new customer acquisition.
For brick-and-mortar businesses, a long-term lease with favorable rent is a major value driver. A short or unfavorable lease can kill a deal or reduce your price significantly.
A business growing 10% to 15% per year will command a higher multiple than one that is flat or declining.
Industry matters enormously. Based on actual transaction data from 2017 through 2025, here are some average SDE multiples by category:
| Industry | Avg. SDE Multiple |
|---|---|
| Restaurants | 2.26x |
| Insurance Agencies | 2.88x |
| Manufacturing | 3.00x |
| Healthcare (Dental) | 3.28x |
| E-commerce | 3.31x |
| Daycares & Preschools | 3.32x – 3.35x |
| Car Washes | 4.56x |
These are averages. Your specific business may be higher or lower based on the factors above.
The most accurate way to value your business is to work with a business broker or certified business appraiser who knows the local market. A broker will pull comparable sales data, calculate your SDE, apply the appropriate industry multiple, and give you a realistic range of what your business would sell for today.
At Jon Tennant Real Estate and Business Brokerage, we offer confidential business valuations for owners across Wake and Durham County. There is no obligation and no pressure. It is just a straightforward conversation about what you have built and what it is worth.
Find out what your business is actually worth today — no obligation, no pressure, just straight answers about the value you have built.
Common questions about valuing a business in North Carolina