Valuation Is Not Guesswork
One of the most common questions from business owners who want to sell is: what is my business worth? The answer cannot be given arbitrarily—business valuation is a systematic process, and experienced business brokers use multiple methods simultaneously to arrive at a number that is defensible at the negotiating table.
Common Valuation Methods
- EBITDA Multiple: The most common method for profitable businesses. The broker calculates EBITDA and multiplies it by a factor typical for that industry—usually between 2x and 8x depending on the business's size, growth, and stability.
- Comparable Transactions: Comparing similar business deals that have occurred in the market. This method requires access to an extensive deal database—a key advantage a broker has over sellers trying to go it alone.
- Asset-Based Valuation: More relevant for businesses with significant physical assets. Value is determined based on total asset value minus liabilities.
Qualitative Factors That Also Affect Price
Brokers also consider non-financial factors: how dependent the business is on its owner, the quality of the team the buyer will inherit, customer base diversification, and brand strength. Businesses that can run without intense owner involvement consistently command higher values. For guidance on when the right time is to bring in a broker, read our article on when you actually need a business broker.
Why Professional Valuation Matters
Sellers who set their own price often fall into one of two extremes: too high, making the business hard to sell, or too low, leaving money on the table. A good broker ensures the price sits in a realistic range that is attractive to qualified buyers.