Research shows that between 70% and 80% of businesses listed for sale never sell.
Some reasons include: the founders don’t prepare for an early exit, there are messy financials, they overestimate their value, and they don’t engage professional valuation experts early.
Whether you’re looking to cash in on years of hard work, venture into a new business, or simply plan for retirement, understanding how valuation works can help you negotiate the best deal.
So, if you’re asking, ‘How much can I sell my business for?’ this blog can help you get a sense of your business’s worth.
Below, you’ll discover the common methods used in business valuation, a practical business valuation example, and expert tips on how to avoid common mistakes that reduce your net gains.
Quick Answer – How Much Can I Sell My Business For?
The short answer: you can sell your business between a few hundred thousand and billions of dollars.
To get an accurate answer to this question, here are some facts about how much business owners sell their businesses for.
- The EBITDA multiples differ by sector and company size. For example, the real estate development subsector sells at a 4.38x revenue multiple.
- For small owner-operated businesses, the Seller’s Discretionary Earnings (SDE) method provides valuation by highlighting the total financial benefit you derive from the business.
- Asset-based valuations help maximize your sales from the assets your asset-heavy businesses own.
- The earnings multiple method is the gold standard for assessing profitability and sale value in established, medium- to large-sized businesses.
- With steady, predictable income, the Discounted Cash Flow method is best, as it values large businesses by projecting and discounting future earnings to today’s dollars.
How Businesses Are Typically Valued
Are you preparing to sell, bring on a partner, or retire successfully? Each situation may call for a different valuation method or even a combination of more than one strategy.
Here are some of the most common methods used to calculate the sales price of your business:
1. Seller’s Discretionary Earnings (SDE)
The SDE method applies a multiplier to the SDE figure, which includes: net income of the business, the owner’s salary, perks, and personal expenses.
An advantage of this method is that it adds back personal expenses into profits, but it doesn’t factor in the work the owner has to put in.
2. Asset-Based Valuation
The asset-based method values businesses based on what they own and owe. It’s calculated by subtracting all liabilities from the business’s assets.
This method provides a clear, objective baseline for negotiations. However, it does not account for intangible assets like customer relationships, trademarks, copyrights, and brand reputation.
3. Earnings Multiple
The multiple method uses industry-specific multiples of key metrics, such as EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) or gross profit, to determine a business’s value.
While this method serves as an efficient benchmark for market comparisons, it often overlooks your business’s growth potential.
4. Discounted Cash Flow (DCF)
The Discounted Cash Flow method is a sophisticated method that applies a discount rate to a formula {DCF = CF¹ ÷ (1 + r)¹ + CF² ÷ (1 + r)² + … + CFₙ ÷ (1 + r)ⁿ} to determine the present value of a future cash flow stream. CF¹ and CF² represent the cash flow for the first and second year, and r represents the discount rate.
The DCF method can help you justify a higher exit price based on your business’s future potential. The downside is that small changes in the discount rate can drastically affect your business’s value, making it prone to error.
5. Times Revenue Method
The times revenue method calculates a business’s revenue over 1 year and then multiplies it by an industry-specific multiplier, which affects the company’s profitability and growth potential.
It is suitable if your business doesn’t have enough historical earnings to use other methods. However, this method can significantly overvalue your business because it doesn’t account for operational expenses.
6. Comparable Analysis
The comparable analysis method estimates a company’s value by comparing it to recent sale prices of similar companies in the same industry.
This method works best if you want to benchmark your performance against your competitors, but it could lead to losses since it neglects your internal operational costs.
Key Factors Influencing What a Business Can Sell For
Understanding the factors that influence your business’s value is crucial to maximizing your exit price.
Some of them are:
- Financial Performance: Predictable and reliable income from recurring revenue reduces risks for buyers, making your business valuation go up
- Profitability: Higher profit margins indicate a well-managed operation with efficient cost control and significant profitability potential.
- Size: Larger businesses often have well-established, stable market presence and customer bases, which make them attractive to large payouts.
- Scalability: A business with the capability of expanding into new markets and product lines shows buyers a clear path to growth post-acquisition, helping you command a premium valuation
- Market Share: A company with a dominant market presence and a huge market share often commands better sales.
- Asset Value: Tangible and intangible assets, such as company property, patents, buildings, customer relationships, and equipment, significantly boost your business’s value by providing a competitive advantage.
- Operations: A capable management team that operates efficiently ensures your business continues to prosper post-sale and earns a higher valuation.
- External Factors: Economic conditions, interest rates, industry trends, and regulatory hurdles can affect the valuation of our business.
- Legal Compliance: Invest in tax and compliance services to ensure you have all the necessary permits, licences, and signal trust to potential investors.
How to Calculate Your Business Worth
To get a ballpark estimate of how much you can sell your business for, you need to have key figures such as operating expenses, revenue, and cost of goods sold.
Here’s how to go about it:
- Add Your Earnings: On top of your annual revenue, add back one-time or non-operational expenses to get your EBITDA
- Determine Your Multiplier: 2X to 3X for owner-dependent firms, 4X to 5X for growth-driven companies with solid management, and 6X for businesses with a dominant market share.
- Apply the Formula: Business Value = (Adjusted EBITDA) X (Industry Multiple)
Let’s look at a hypothetical example of a manufacturing company that is in a fast-growth industry:
- Reported Net Profit: $400,000
- Add Backs: $70,000 (Owner’s salary) + $30,000 (one-time non-operational cost)
- Adjusted EBITDA: $500,000
- The Multiple: 5X because it is in a fast-growing industry
The Valuation: $500,000 X 5 = $2,500,000
Common Mistakes That Reduce Your Sale Price
For most business owners, it’s their first time selling their company, which can make it difficult to get the exit strategy right.
Here are some of the common mistakes that reduce the business sale price and how you can avoid them:
| Mistake | Explanation | Common Fixes |
| Focusing Only on Price | Focusing solely on price while ignoring deal terms, such as earnouts, can significantly affect your post-sale experience. | Ensure the payment method and tax implications of selling a business in Canada are favourable to you. |
| Poor Financial Records | Prospective buyers shy away from businesses with poor financial record-keeping. | Ensure your books are up to date, accurate, and organized to attract premium offers. |
| Selling Your Business Alone | Going solo without expert help could lead to mistakes that lower your net proceeds. | Consider professional business valuation services to get actionable insights and support throughout the transaction. |
| Ignoring Intellectual Property (IP) | Failing to license intellectual property, such as patents, trade secrets, copyrights, and trademarks, can devalue your business. | Perform a thorough review of your IP to ensure it is well-documented and legally protected. |
| Owner Dependence | A business that depends on the owner to operate and maintain key customer relationships creates a significant risk for potential buyers. | Document Standard Operating Procedures (SOPs) and cross-train employees so the business can run without you. |
| Limiting Yourself to One Type of Buyer | Some sellers are too picky and choose a buyer type, assuming it will be a quick, straightforward process. | Having multiple ideal buyers, whether strategic, individual, or financial, creates competition and gives you higher negotiating leverage. |
Partner with expert professional valuation experts, such as JS CPA Strategic Solutions, to avoid these mistakes. Check out how we approach business valuation below.
The JS CPA Approach to Business Valuation
At JS CPA Strategic Solutions, we guide 7-to 8-figure businesses through the stressful business sale process, ensuring no money is left on the table.
Our core pillars, designed for smarter deals and maximum net proceeds, include:
- The Growth Mosaic Strategy: We integrate every essential element of your financial life into a single cohesive plan that ensures your business is highly sought after.
- Exit Readiness and Strategic Planning: We conduct a deep-dive assessment to identify and address value gaps across key areas, including operational systems, tax positions, and legal structures.
- Tax and Deal Structuring: We work closely with clients to structure deals that maximize tax efficiency. We focus on achieving Qualified Small Business Corporation (QSBC) status, claiming the Lifetime Capital Gains Exemption (LCGE), and optimizing capital gains to protect your wealth from the CRA/IRS.
- Fractional CFO Services: Our CFO services ensure you get clear and optimized financial reporting by cleaning up financial statements and documenting systems that prove your business can run without you.
Frequently Asked Questions (FAQs)
Do you have any more queries on how much the business can be sold for?
Explore the answers to the frequently asked questions below:
Why Do Similar Businesses Sell for Different Prices?
Two similar businesses generate the same amount of revenue on paper but sell for different prices.
Some of the reasons that would make a business fetch more than its peers include:
- Corporate tax planning strategies that minimize money lost to the IRS/CRA
- Higher profit margins from efficient management of the cost of production
- Diversified customer base
Can I Sell a Business with Outstanding Loans?
Definitely! You can sell a business even if it has outstanding loans or debt.
Most business owners choose to finance debt with proceeds, since buyers may be hesitant to assume it.
What’s the Difference Between Asking Price and Actual Sale Price?
The asking price is the initial price at which a seller hopes to sell the business based on factors such as the company’s appraised value and personal financial considerations.
The actual sale price, on the other hand, is the price at which a business sells, determined by market conditions and negotiations between the seller and the buyer.
Will My Business Valuation Change If I Keep It Operational?
The short answer is yes. Your business valuation should continue to increase as long as it remains operational.
An operational business will attract favourable valuation methods, such as the earnings multiple, which will ultimately result in a better sale price.
Conclusion
There you have it, on how much you can sell a business for. Most business valuations are based on earnings multiples informed by recent sales of similar businesses, while also considering factors such as assets, future cash flows, and market presence.
Understanding these value drivers helps you plan strategically and spot weaknesses early, ensuring you gain maximum benefits from a business sale.
At JS CPA Strategic Solutions, we offer professional business valuation services, and we can help you build a credible valuation range based on real market data and address value gaps before they reduce your after-sale proceeds.
We help founders with sell-side and buy-side transactions, providing valuation assessments grounded in current business data.
Book your strategy call today, and let’s give you an accurate valuation and offer guidance on cross-border and tax complexities in your deal structures!