There is no one way that all buyers will use to put a valuation on your business. So, a seller must perform a detailed valuation exercise to attract the right buyers for the business and defend their sale price.
A rudimentary approach is to take your SDE and multiply by an industry average multiple – the safe multiple is between 3x and 4x.
SDE = Seller’s Discretionary Earnings = (Total Sales – Total Expenses + Owner’s Salary & Draws).
Multiply the SDE by 3 to be on the safe side and you have a very rough number.
However, a lot of other factors go into a valuation and we are happy to provide you a detailed report and a free valuation.