What Is My Business Worth?
Most owners ask this question at the wrong moment. A partner wants out. A divorce filing lands. A buyer shows up with a letter of intent and a 30-day window. The number matters most exactly when there is the least time to influence it.
The better version of the question is the one asked three years early: what is my business worth today, and what would make it worth more? This article covers how businesses are actually valued, what moves the number, and how to get a real answer instead of a guess.
The short answer
A private business is worth what its future cash flows justify, adjusted for risk, tested against what comparable businesses have actually sold for. For most owner-operated companies under $10M in revenue, the market prices the business as a multiple of Seller’s Discretionary Earnings (SDE) or EBITDA. The multiple is where the argument lives. Two businesses with identical earnings routinely sell for numbers that differ by 40% or more, because the multiple prices risk: customer concentration, owner dependence, lease terms, industry trajectory, and the quality of the books.
That is why a revenue rule of thumb (“businesses like mine sell for 1x revenue”) is usually the most expensive shortcut an owner takes. Rules of thumb ignore everything a buyer’s lender will not.
How businesses are valued: the three approaches
Every credentialed valuation uses some combination of three approaches. Knowing them helps you understand any number anyone ever quotes you.
The income approach values the business on its expected future earnings, discounted for risk. In practice this means normalizing the earnings first: adding back owner compensation above market rate, one-time expenses, and personal items running through the P&L, then applying either a capitalization rate or a discounted cash flow model. This approach carries the most weight for profitable operating companies.
The market approach looks at what comparable businesses actually sold for, drawn from private transaction databases. It answers the question every buyer asks: what does the market pay for businesses like this one? The skill is in selecting genuinely comparable transactions by size, industry, and geography, not just industry code.
The asset approach values the business as the fair market value of its assets minus liabilities. It sets the floor. For most operating businesses with real earnings, it produces the lowest number of the three and matters most for asset-heavy or distressed companies.
A credentialed analyst runs the approaches that fit the company, reconciles the results, and explains the weighting. If someone hands you a single number with no reconciliation, you have a guess with a cover page.
What moves the number
Five factors explain most of the spread between businesses with similar earnings:
Owner dependence. If the business cannot run 30 days without you, the buyer is purchasing a job, and jobs trade at lower multiples than companies.
Customer concentration. One customer above 20% of revenue triggers a discount. Above 40%, some buyers and most lenders walk.
Quality of financials. Clean, accrual-basis books that tie to tax returns support the multiple. Messy books cost real money at the closing table, every time.
Recurring revenue and contracts. Predictable revenue prices higher than project revenue. Transferable contracts price higher than handshakes.
Lease and location terms. For location-dependent businesses, a short remaining lease term can cap the price or kill a buyer’s SBA financing outright.
The useful part: every one of these is fixable, given time. This is the case for finding out the number early.
How do I find out the value of my business?
There are three tiers, and the right one depends on what the number is for.
An indication of value is a preliminary estimate built from your actual financials, using real methodology but without the depth of a full engagement. It answers “roughly what is it worth and what is holding it back.” It is the right starting point for planning, and the wrong document for the IRS or a courtroom.
A calculation of value is a formal engagement under NACVA standards where the analyst and client agree on the approaches used. Common for internal planning, buy-sell funding, and early exit work.
A conclusion of value is the full opinion: all relevant approaches, full documentation, prepared to professional standards. This is what estate and gift tax filings, litigation, and contested matters require.
Match the tier to the purpose. Paying for a conclusion of value to satisfy curiosity is a waste. Bringing an online calculator printout to a tax filing is worse.
Where to start
OakStone built a no-cost indication of value tool for exactly this first step. You provide the financial basics, and you get back a grounded estimate with the factors driving it, prepared under the direction of CVA-credentialed analysts rather than a generic multiplier script. Start there: indication.oakstonevaluationgroup.com. If the number, or the gap between the number and what you need, warrants a formal engagement, we will tell you which tier fits and why.
The owners who get the best exits are the ones who knew the number years before they needed it.