How do I calculate what my business is worth to sell?

A reliable sale value combines a normalized earnings figure with a market-based multiple, then cross-checks that number against your assets and cash flow. There's no single formula that fits every business, which is why a professional business valuation blends multiple approaches rather than relying on one shortcut.

The core calculation

For most small and mid-sized businesses, buyers price a deal off seller's discretionary earnings (SDE) or EBITDA, multiplied by a market-based multiple:

SDE approach (smaller businesses): Start with net income, then add back owner salary, owner benefits, one-time expenses, and non-cash charges like depreciation. Multiply that adjusted figure by a multiple drawn from comparable sales in your industry.
EBITDA approach (larger, more established businesses): Apply a market multiple to earnings before interest, taxes, depreciation, and amortization, the standard measure used in most M&A transactions.
Asset-based approach: Total the fair market value of assets and subtract liabilities. This matters most for asset-heavy or underperforming businesses where the sale is really about equipment, inventory, or real estate rather than ongoing earnings.

A defensible number reconciles all three: your earnings multiple, comparable market transactions, and your balance sheet. Getting the multiple right depends on factors like recurring revenue, customer concentration, owner dependence, and growth trends, which is where a rule-of-thumb calculation tends to break down for anything beyond a rough estimate.

Why a formal valuation matters for a sale

A calculator or back-of-envelope multiple gives you a starting range, but buyers, their lenders, and their advisors will scrutinize the number during due diligence. A valuation prepared in accordance with USPAP normalizes your financials, selects the methodology appropriate to your business and industry, and documents the reasoning behind the concluded value, which holds up far better in negotiations than a multiple pulled from an online estimator.

Connecticut businesses selling to a strategic buyer, private equity firm, or through an SBA-financed purchase typically need this level of documentation to support the asking price and satisfy the buyer's lender. See our business valuation pricing for how fees are structured for M&A and transaction-support engagements.