What Is Your Business Actually Worth?
One of the most common misconceptions business owners hold is that their company is worth what they've put into it — in time, money, or emotion. In reality, market value is determined by what a qualified buyer is willing to pay based on financial performance, risk, and growth potential.
A professional valuation gives you a realistic, defensible number to take to market. It also helps you identify gaps to close before listing — potentially adding significant value before the first buyer ever walks through the door.
At Defender Capital, we perform complimentary market valuations for all qualified sellers as part of our initial consultation. Our assessments draw on current transaction data, industry multiples, and a thorough review of your financials.
The Bottom Line
Most small businesses sell for 2–4× their annual Seller's Discretionary Earnings (SDE). However, well-documented, systemized businesses with strong growth trends can command 5× or more. Knowing where you stand — and why — is everything.
How Businesses Are Valued
Seller's Discretionary Earnings (SDE)
The most common method for businesses under $5M. SDE represents the true economic benefit to a full-time owner-operator — net income plus the owner's salary, perks, one-time expenses, and non-cash charges.
EBITDA Multiple
Used for larger businesses (typically $1M+ EBITDA), this method applies an industry-specific multiple to Earnings Before Interest, Taxes, Depreciation, and Amortization, normalizing for capital structure differences.
Asset-Based Valuation
Best suited for asset-heavy or distressed businesses, this method values the company based on net tangible assets — equipment, inventory, real estate — minus liabilities. Often used as a valuation floor.
Discounted Cash Flow (DCF)
Projects future cash flows and discounts them to present value using a risk-adjusted rate. Most applicable to growth-stage businesses with predictable, scalable revenue.
Market Comparables
Benchmarks your business against recent sales of comparable companies in the same industry, revenue range, and region. Defender Capital has access to proprietary transaction databases covering thousands of closed deals.
Revenue Multiple
Common in SaaS or subscription businesses where profitability is secondary to recurring revenue. Multiples typically range from 0.5× to 3× annual revenue depending on churn, margins, and growth rate.
Key Value Drivers
Three or more years of upward trending revenue signals a healthy, scalable business to buyers.
Businesses that run well without the owner command premium multiples and attract stronger offers.
Subscriptions, service contracts, and retainers reduce buyer risk and meaningfully increase value.
No single customer should exceed 20% of revenue. Concentration is a major red flag for buyers.
Professionally prepared, multi-year financials dramatically reduce due diligence friction and delays.
SOPs and processes that don't live in the owner's head are a major plus for any acquirer.
Reviews, ratings, and brand presence add intangible value that sophisticated buyers factor into offers.
Long-term contracts, proprietary products, or geographic dominance add durability and command premiums.
What Reduces Your Multiple
Customer concentration above 25% of revenue is the single biggest red flag. Other common discounts: owner dependence, informal financials, declining revenue trend, deferred maintenance, unresolved litigation, and key-person risk in employees.
The good news: most of these are fixable with 12–18 months of preparation before going to market.