How much should I sell my business for?

You should sell your business for what a buyer will pay for the earnings it is likely to keep producing after you leave, adjusted for the risk that those earnings do not hold. Revenue, a friend's sale price, or the amount you need rarely set that number. A valuation gives you a range, and negotiation settles the price.

The question usually arrives with someone else's number: a buyer's first call, a banker's rough estimate, a friend's sale that sounded high. None of those numbers is the selling price of your business until it has been rebuilt from your own earnings and your own risks. That rebuilding is mostly arithmetic, plus a few direct questions about how much of the business depends on you.

What decides the selling price of a business?

Three things decide it: how much the business earns, how reliably it will keep earning, and how fast those earnings are likely to grow.

Buyers rarely use your profit as reported. For a small owner-operated company they usually restate it as seller's discretionary earnings (SDE), which adds your pay and personal expenses back to profit. For a larger company they use EBITDA, earnings before interest, taxes, depreciation, and amortization. The restated figure is then multiplied by a number that reflects how risky the earnings look.

The IRS has described the risk side since 1959. Revenue Ruling 59-60 was written for estate and gift tax valuations, and it is still widely used as the starting point for valuing closely held companies. It says that uncertainty about the stability or continuity of future income lowers value, because it raises the risk of losing earnings. It also says that losing the manager of a "one-man" business can depress the value, especially when no trained person is ready to take over.

Size changes the multiple too. In its second-quarter 2026 report, the International Business Brokers Association (IBBA) put deals priced under $500,000 at 2.0 times SDE, deals from $2 million to $5 million at 4.0 times EBITDA, and deals from $5 million to $50 million at 5.8 times EBITDA. Those are market-wide figures for the size bands IBBA tracks. They describe how deals priced, and they are not a valuation of your business.

How do the three valuation approaches differ?

They differ in what they start from, and a formal valuation usually weighs more than one.

The Small Business Administration describes the same three approaches and points sellers to The Appraisal Foundation to learn more about the resources needed for business valuation appraisals. The IRS ruling adds a caution that applies to all three: no formula fits every case, and valuation "is not an exact science."

What moves the number between a valuation and a price?

The terms of the deal do. Two offers with the same headline price can leave you with different amounts, depending on how much arrives at closing, how much comes later, and what is adjusted afterward.

IBBA's second-quarter data show cash at closing as the largest part of the financing in every size band it tracks, with seller financing, earn-outs, and retained equity making up the rest. An earn-out pays part of the price later, if the business hits agreed targets, so its worth to you depends on targets you may not control. The price can also be adjusted after closing for working capital, debt, or cash.

What you keep after tax depends on how the sale is structured, for example as an asset sale or a stock sale. Model what you keep after tax under each structure before you compare offers. We build that comparison with you.

Your own situation moves the number as well. The IRS definition of fair market value assumes that neither side is under compulsion to act. Real sales are rarely that tidy, and a seller who has to close by a certain date has less room to say no to a low offer.

When is a good time to sell?

A good time is when your earnings are steady or rising, you are ready personally, and buyers in your size range are active.

IBBA's chairman summarized the second quarter of 2026 this way: above $2 million, strong businesses were still drawing meaningful competition, and at the smallest end of the market buyers held the stronger position and were more sensitive to financing, margins, and operating risk. So the market you are selling into depends partly on your size. Your own plans count as well: retirement, health, family, or a project you want to start.

What to do next

1. Pull three years of financial statements and tax returns, and restate your profit the way a buyer will: add back pay above or below market and personal expenses, and take out one-time items. How to calculate an EBITDA multiple walks through the arithmetic.
2. List what a buyer would worry about: how much of your revenue comes from your largest customers, what only you can do, and what is not written down.
3. Decide what you need to keep after tax and debt, so you can compare offers by what reaches you.
4. If a sale is a year or two away, ask a qualified valuation professional for a formal valuation.

We help you work out a valuation range, get the numbers behind it clean, and prepare the materials a buyer asks for. That is the core of our M&A advisory work.

Questions owners ask

Is revenue a good guide to what my business is worth?

Not on its own. Buyers pay for earnings, so two companies with the same revenue can sell for different prices if one keeps more of each dollar or relies less on its owner. Revenue starts the conversation, and restated profit is what gets multiplied.

Should I set a high asking price and negotiate down?

An asking price is a starting point that a buyer will test against your financial statements. A price you cannot support with clean numbers invites questions you will have to answer anyway, so build the support before you name the figure.

What if I don't need to sell yet?

You can learn what the business is worth without committing to a sale. An early number shows which gaps a buyer would price, and it leaves time to close the ones you can. Exit optionality covers how to prepare without committing.