The short answer: Value = SDE × industry multiple. Find Seller's Discretionary Earnings (profit + one owner's pay & perks + interest + taxes + depreciation + one-time add-backs), then multiply by a market multiple. In 2026 the median small business sold at about 2.7× SDE (~$350k price on ~$165k of SDE); the overall average is ~2.5× SDE. So a business with $200,000 SDE at a 2.7× multiple is worth about $540,000. Price any deal in the valuation calculator, then confirm it cash-flows with the DSCR calculator.
The SDE-multiple method in one table
Here is the whole method on one line, then a worked example so you can see the numbers move:
Business value = SDE × industry multiple
| Step | What you do | Result |
|---|---|---|
| 1. Find SDE | Net profit + owner's pay & perks + interest + taxes + depreciation + add-backs | $200,000 |
| 2. Pick the multiple | HVAC sells around 2.8× SDE in 2026 | 2.8× |
| 3. Multiply | $200,000 × 2.8 | $560,000 |
| 4. Adjust for quality | Recurring contracts & a manager → nudge up; owner-dependent → nudge down | ±10 to 20% |
| 5. Sanity-check | Can the cash flow cover the loan at a safe DSCR? | Yes → offer |
That is the entire skill. The rest of this hub goes deep on each step. Start with the step-by-step method, or jump to the guide you need below.
Why valuation matters when you're buying
When you buy a business, the valuation is not an academic exercise, it decides whether the deal works or crushes you. Three reasons it matters:
- It sets your offer. A fair value is your anchor. Without it you're negotiating blind against a seller who has thought about their number for years.
- It decides if the business pays for itself. Overpay, and the loan payment eats all the cash flow. The price has to leave room for a safe debt-service coverage ratio and a salary for you.
- It protects your down payment. Most buyers use an SBA loan with 10% down. If you overpay, that equity vanishes the day you close.
You don't make your money when you sell a business. You make it the day you buy, at the right price.
2026 multiples by industry
The multiple is what the market pays per dollar of SDE. It moves with the industry, the size, and the quality of the business. These are typical 2026 SDE multiples for owner-operated small businesses. See the full data set on the industry multiples page.
| Industry | SDE multiple | Why |
|---|---|---|
| Car wash | 4.7× | Real estate, recurring memberships, low labor |
| Laundromat | 4.1× | Semi-passive, cash-flow stable |
| Childcare / daycare | 3.4× | Sticky demand, licensing barriers |
| E-commerce | 3.3× | Scalable, but platform-dependent |
| HVAC | 2.8× | Service contracts, skilled trade |
| Auto repair | 2.7× | Steady, equipment-heavy |
| Plumbing | 2.6× | Trade skill, some recurring work |
| Landscaping | 2.56× | Seasonal, recurring maintenance helps |
| Gym / fitness | 2.44× | Membership churn, high fit-out cost |
| Pest control | 2.35× | Recurring routes prized |
| Accounting | 2.33× | Recurring clients, owner-dependent |
| Cleaning | 2.3× | Low barrier, labor-heavy |
| Restaurant | 2.26× | Thin margins, high failure rate |
Source: BizBuySell Insight Report (2026) and Acquisition Ace industry multiples data. Multiples are a starting point, quality moves them up or down.
The complete valuation library
Every guide below is a deep-dive. Read them in order for the full method, or jump to what you need right now.
Price a real deal in 60 seconds
Enter SDE and pick an industry, get an instant value range, then check that it cash-flows.
Frequently asked questions
Find the business's SDE (its real owner earnings), then multiply by a market multiple for its industry. In 2026 the median small business sold at about 2.7× SDE, so a business with $165,000 of SDE is worth roughly $445,000. Then adjust for quality and check it cash-flows.
About 2.7× SDE at the median and ~2.5× on average in 2026, per the BizBuySell Insight Report. It ranges from ~2.3× for restaurants to ~4.7× for car washes. See the full table.
Seller's Discretionary Earnings, the total yearly benefit to one owner-operator. It's net profit plus one owner's salary and perks, plus interest, taxes, depreciation, and one-time add-backs. It's used for owner-run businesses under about $1M in earnings. Full guide: SDE deep dive.
It sets your offer and decides whether the business can pay for itself. Overpay and the loan payment eats the cash flow, leaving no cushion and putting your down payment at risk. See how much to offer.
Sources
- Median price, median cash flow, and average multiples, BizBuySell Insight Report (2026).
- Industry SDE multiples, BizBuySell and broker transaction data, compiled on the Acquisition Ace multiples page (2026).
- SDE / EBITDA definitions, standard business-valuation references (IBBA, Pratt's Valuing a Business).
