Your business is worth its documented earnings times a multiple. The multiple depends on your size, your sector, and your risk. Published surveys show what businesses actually sell for at each size. This page gives you those numbers, with a source and a date on every one. It also teaches the lesson most owners never hear: at about $2 million, the earnings measure itself changes.
The Formula: Earnings Times a Multiple
Nearly every profitable small business sells the same way. The price is a normalized earnings figure times an agreed multiple. I covered the basic methods in my guide to selling your LLC in Illinois. This page goes deep on one question. What multiple do businesses like yours actually get?
The formula rewards two moves. Every documented dollar of earnings is worth several dollars of price. Every step in the multiple is worth a multiple of your entire earnings. On a business earning $200,000, a move from 2.5x to 3.0x adds $100,000. Those are invented round numbers. They only show the arithmetic. The market numbers come next, and every one carries its source and its date.
What Businesses Actually Sell For, by Size
The IBBA and M&A Source publish the Market Pulse survey. It reports the multiples that closed deals actually priced at, grouped by sale price. Here are the figures from the Q4 2024 Market Pulse report.
| Sale Price | Typical Multiple | Earnings Basis |
|---|---|---|
| Under $500K | 2.0x | SDE |
| $500K to $1M | 2.8x | SDE |
| $1M to $2M | 3.0x | SDE |
| $2M to $5M | 3.6x | EBITDA |
| $5M to $50M | 6.0x | EBITDA |
Source: IBBA / M&A Source Market Pulse, Q4 2024.
BizBuySell's Insight Report points the same direction. It put the median main street sale at about 2.7x SDE in Q1 2026, on a median price near $350,000 (BizBuySell Insight Report, Q1 2026).
Read the table with care. The earnings basis flips at $2 million. That flip is the next lesson, and it is the most misread line in the whole table.
The $2 Million Crossover: SDE Becomes EBITDA
Look at the jump in the table. The multiple steps from 3.0x to 3.6x at $2 million. Owners read that step as a size premium. Most of it is not. The denominator changed underneath the multiple.
Below about $2 million, deals price on SDE, or Seller's Discretionary Earnings. SDE is net profit plus the owner's full salary and benefits, plus personal expenses run through the company, plus true one-time costs. The buyer is usually one person. That person will replace you in the chair. Your whole compensation becomes their benefit, so it counts in the earnings.
Above about $2 million, deals price on EBITDA, which is earnings before interest, taxes, depreciation, and amortization. EBITDA charges a market salary for a manager before anything gets counted. The buyer is a company or a fund. It must hire your replacement. Your pay is a cost to that buyer, not a benefit, so it comes out of the earnings.
The same business always shows a bigger SDE than its EBITDA. The Market Pulse survey states the split on its own chart: deals under $2 million price on SDE, and deals from $2 million to $50 million price on EBITDA (IBBA / M&A Source Market Pulse, Q4 2024).
Here is a worked example, with invented round numbers. A business earns $500,000 in SDE. A replacement manager costs $150,000. So EBITDA is $350,000. At 3.0x SDE the price is $1,500,000. At 3.6x EBITDA the price is $1,260,000. The higher multiple produced the lower price, because it sits on the smaller number.
Two rules follow. Never compare an SDE multiple to an EBITDA multiple. And never apply an EBITDA multiple you read online to your SDE. That mistake overstates your value badly, and a buyer will use it to discredit your whole analysis.
- Owner works in the business daily
- Buyer is an individual replacing you
- Owner's full compensation added back
- Price reflects buying a job plus a return
- Management team runs day to day
- Buyer is a company or fund
- Market salary for a manager subtracted
- Multiples run higher, but on a smaller number
Moving from the SDE world into the EBITDA world is a real strategy. It means building management depth before you sell. That is the whole subject of my exit-ready LLC guide.
Your Sector Moves the Number Too
Size is only half the map. DealStats tracks closed private transactions across all industries. Its Value Index put the all-industry median at about 3.5x EBITDA in Q4 2025 (BVR DealStats Value Index, Q4 2025). Inside that same quarter, sector medians ran from about 2.6x for arts, entertainment, and recreation up to about 14.6x for the information sector (DealStats, Q4 2025).
That spread is wider than the entire size ladder above. So locate your business twice. Find your size band first. Then find your sector. Argue from those two coordinates, not from a number a competitor heard somewhere.
Why Public Company Multiples Do Not Apply to You
Sooner or later, someone quotes your industry's headline multiple at you. Those headlines usually come from public company data. Professor Aswath Damodaran at NYU Stern publishes sector EV/EBITDA figures, last updated January 2026. Those are trading multiples for public companies. They are also capitalization weighted, so a few giant firms pull every sector average up.
Your private business does not sell at those numbers. Set against the private transaction data above, public sector multiples run about two to three times what a small private seller actually clears. I quote none of the sector figures here on purpose. Not one of them applies to a main street or lower middle market sale. When a buyer or a broker says your industry "trades at" some big number, that line describes the stock market. It does not describe your closing table.
Revenue rules of thumb fail for a different reason. Revenue is not what a buyer keeps. Two contractors can each bill $1,000,000 and take home very different profits. A revenue rule prices them identically. No buyer who can read a profit and loss statement will do that. Rules of thumb are set by nobody in particular, on factors nobody can examine. Treat them as a sanity check at most.
Unsolicited buyers count on you not knowing your number. If one has approached you, read my guide on what to do when someone wants to buy your business before you respond.
What Private Equity Pays in the Middle Market
Above the Market Pulse bands, private equity buyers report their own pricing through GF Data. Every fund on that table raised its money under the disclosure document I walk through in my guide to private placement memoranda, and how a buyer raised its money shapes how it must spend it. Here are the average purchase multiples by total enterprise value (TEV), year to date through Q3 2025.
| Total Enterprise Value | Average Multiple | Earnings Basis |
|---|---|---|
| $10M to $25M | 6.4x | TTM adjusted EBITDA |
| $25M to $50M | 6.8x | TTM adjusted EBITDA |
| $50M to $100M | 8.3x | TTM adjusted EBITDA |
| $100M to $250M | 10.3x | TTM adjusted EBITDA |
Source: GF Data, year to date through Q3 2025.
Within a single earnings basis, size alone is worth real money. GF Data measured a spread of almost three full turns between platforms above $100 million TEV and platforms below it, over the first nine months of 2025 (GF Data, Q3 2025 report). Buyers pay more for bigger businesses because bigger earnings streams carry less risk.
EBITDA Is a Negotiated Number
Every multiple above sits on an earnings number. That number is not a fact. It is a negotiated figure, built through adjustments called add-backs. Normalizing earnings is the highest-leverage pre-sale work a seller can do. It is also where sellers lose credibility fastest. The classic categories have not changed in forty years.
Owner compensation. Whatever you pay yourself gets normalized, above or below market. This cuts both ways. The owner who underpays herself must show what a replacement really costs.
Personal expenses through the business. The family cell phones. The truck that is really yours. The trip that was mostly vacation. This is the most common legitimate add-back. It is also the first place the buyer's accountant looks.
Rent normalization. Do you own the building and charge no rent? Then your earnings hide a cost every buyer will bear. Above-market rent to yourself works in reverse. Either way, a fair market occupancy charge goes in.
True one-time items. The flood. The lawsuit. The website rebuild. "One-time" is the most abused phrase in small-business accounting, and buyers know it.
A worked illustration, with invented numbers. An HVAC company shows $80,000 in net profit. The owner drew a $95,000 salary. She ran $12,000 of personal vehicle and phone costs through the company. She also paid $18,000 to defend a lawsuit, now fully resolved. SDE is the sum: $205,000. At any multiple, the gap between pricing off $80,000 and pricing off $205,000 is the whole deal. The add-back schedule, not the asking price, is the real opening argument.
The clean-up also takes time to season. Buyers average multiple years, so this year's changes only fully count once they have a track record. Is a sale even on your five-year horizon? Then start now.
Prepare Your Financials Before You Go to Market
Buyers will audit your earnings either way. The question is who runs the numbers first. The data says sellers who prepare get paid for it.
GF Data analyzed 360 completed transactions from Q3 2024 through Q2 2025. Nearly half of those deals included a sell-side quality of earnings report. Deals with one closed at an average of 7.4x TEV to EBITDA. Deals without one closed at 7.0x (GF Data, via ACG Insights, 2025). That is roughly half a turn of extra price. The measured benefit concentrated in deals above $50 million of enterprise value.
A main street seller will not commission an institutional accounting report. I break down what those reviews test and what they find in owner-operated books in EBITDA vs. quality of earnings. The lesson still scales down. The small-deal version of a sell-side QoE is a documented SDE schedule with evidence attached to every add-back. Whoever presents a supported number first controls the frame. Sloppy books do the opposite. They license the buyer's accountant to assume the worst.
What Actually Moves the Multiple Up
The survey tables give you a band, not a verdict. Inside the band, the multiple is a risk argument. Flip a multiple upside down to see this. A buyer paying 3.0x needs the business to pay for itself in about three years. A buyer paying 5.0x accepts a longer payback, because they see the earnings as safer. A low multiple is not "the market." It is an assertion that your earnings are risky. Raise the multiple by removing risks before a buyer can price them. Four factors do most of the work at main street scale.
Transferability is the master variable. Is the earnings stream really your personal relationships and your license? Then a buyer is right to discount it. That is why owner-dependent deals carry long transitions and tight non-competes. Customer concentration gets priced most brutally, because the buyer cannot fix it. If one customer is 40 percent of revenue, the business gets priced as it would look the day that customer leaves. Clean books earn their multiple twice. Verified earnings support the price. Sloppy records invite the worst assumptions. And management depth is what eventually moves a business from SDE pricing to EBITDA pricing, and up the size table with it.
All four factors are buildable. None can be built during a sale process. They are one-to-three-year projects. That is why valuation work belongs at the start of your LLC ownership life cycle, not the end.
The Headline Price Is Not What You Pocket
Buyers quote prices as if the business had no debt and no excess cash. Deal lawyers call that enterprise value. Sellers hear the number and mentally deposit it. The gap is where deals turn bitter. Here is the bridge, with invented round numbers.
| Illustration Only (Invented Figures) | Amount |
|---|---|
| Headline purchase price | $900,000 |
| Pay off business loan and equipment financing | ($140,000) |
| Escrow / holdback until releases issue | ($90,000) |
| Broker commission and professional fees | ($75,000) |
| Federal and state taxes on the gain | (varies with allocation and structure) |
| Wired at closing, before taxes | $595,000 |
Three mechanisms drive the erosion. First, debt comes off the top. The headline price assumes the buyer gets the business unencumbered. So your SBA loan, equipment notes, and lines of credit get paid from your proceeds. Second, working capital. In larger deals the parties set a normal level of receivables and inventory, called a peg, and the price adjusts to what is actually there at closing. In small Illinois deals the same fight shows up as who keeps the receivables, whether cash is included, and the bulk sale holdback held in escrow until the state issues tax releases. Third, taxes and fees. The purchase price allocation can swing your tax bill substantially. I cover that mechanism in the selling guide.
These definitional points are pricing terms wearing legal-boilerplate costumes. Every item the buyer's lawyer classifies as "debt-like" moves the price dollar for dollar. Model every proposed definition against your actual balance sheet. Convert every formula into a dollar figure before you sign. "We will true up working capital at closing" sounds administrative until it costs you $40,000.
Want a Second Opinion on a Number?
Whether you have an offer in hand or you are just planning ahead, I will walk through the earnings math, the add-backs, and the structure with you before you commit to anything.
Your Price, My Terms
There is an old deal-table line: "You can name the price if I can name the terms." A buyer who cannot justify your number in cash can agree to it on paper. Then the buyer claws the risk back through structure.
Suppose you insist on $1,000,000 (invented, as before). Buyer A offers $850,000 cash at closing. Buyer B offers your full $1,000,000: $500,000 cash, a $250,000 promissory note over five years, and $250,000 contingent on revenue targets you will no longer control. Buyer B "paid your price." Yet Buyer A may be the better deal, depending on how the note is secured and how the targets are defined. The contingent piece is an earnout. The definitional games buyers play with earnout metrics are the subject of my earnouts guide. The note is seller financing. That is a useful tool, but price it as what it is: a loan from you to a stranger, secured by a business you just handed over.
Structured deals are not bad. But every term has a cash value, and you must compute it before you agree. These trades first appear in the letter of intent. That is exactly when sellers have the most leverage and use the least of it. The valuation fight and the terms fight are the same fight. A seller who wins the multiple argument, then gives it back through an unsecured note and a loose earnout, has won nothing.
Frequently Asked Questions
It depends on size. The IBBA / M&A Source Market Pulse survey (Q4 2024) reported that businesses under $500,000 sold at about 2.0x SDE, $500,000 to $1 million at 2.8x SDE, $1 million to $2 million at 3.0x SDE, $2 million to $5 million at 3.6x EBITDA, and $5 million to $50 million at 6.0x EBITDA. Sector moves the number too, and multiples shift with the deal cycle, so confirm the current release before you rely on a figure.
SDE (Seller's Discretionary Earnings) is net profit plus everything one working owner takes out of the business: salary, benefits, personal expenses, and one-time costs. It is the main-street standard when an individual buyer will replace the owner. EBITDA, used for larger businesses with management teams, is earnings before interest, taxes, depreciation, and amortization, calculated after charging a market salary for management. Deals under about $2 million price on SDE and deals above it price on EBITDA (IBBA / M&A Source Market Pulse, Q4 2024). Never apply an EBITDA multiple to an SDE number.
An add-back restates your books to show what the business truly earns: the owner's salary, personal expenses run through the company, and genuine one-time costs. Rent is the exception that cuts both ways. If you charge yourself above-market rent the excess comes back as an add-back, and if you own the building and charge nothing, a market occupancy charge gets subtracted instead. Add-backs get multiplied by the deal multiple, so each documented dollar is worth several dollars of price. Buyers reverse any add-back they can recast as a recurring cost, so attach evidence to each one.
Almost never for main-street businesses. Revenue ignores profitability: two businesses with identical sales can have completely different earnings, and buyers pay for earnings. Rules of thumb are set by nobody in particular on factors nobody can examine, and a well-informed buyer will not pay a price supported only by a formula. Treat them as a sanity check at most.
No. The headline price is typically quoted as if the business had no debt, so your loans get paid off from the proceeds. Part often sits in escrow until Illinois tax releases issue, part may be deferred through a seller note or earnout, and broker fees and taxes come out of what remains. Compare offers on what reaches your bank account, not on the headline.
Not always a formal appraisal, but you need a defensible earnings analysis before you talk to any buyer, because whoever names a supported number first controls the frame. If you commission an appraisal, pay a flat fee: one priced as a percentage of value or contingent on closing loses its credibility as a negotiating tool. For most main-street sellers, a documented SDE calculation does more work than an expensive report.