There’s no single “right” number — but there is a method buyers actually use. Understand it, and you can estimate your value, see what would raise it, and negotiate from a position of knowledge.
The short answer: a multiple of earnings
Businesses in the $1.5M–$10M revenue range are almost always valued on a multiple of Adjusted EBITDA — not revenue, and not profit as shown on the tax return.
So two things drive your value: how much the business genuinely earns (Adjusted EBITDA), and how much risk and quality is priced into the multiple.
What is Adjusted EBITDA?
EBITDA = Earnings Before Interest, Tax, Depreciation and Amortisation — a cleaner picture of operating performance than net profit.
Adjusted (or “normalised”) EBITDA goes further and adds back costs a new owner wouldn’t carry:
- An above-market owner’s salary (or below-market — adjusted the other way).
- Personal or discretionary expenses run through the business.
- One-off, non-recurring items (a legal settlement, a relocation, COVID-era distortions).
This is the single most important number in your sale — and where buyers scrutinise hardest. Every add-back must be defensible with evidence.
Typical EBITDA multiples by business type
Multiples rise with size, stability and transferability. As a guide for the SME segment:
| Business profile | Typical EV / EBITDA |
|---|---|
| Owner-dependent micro business (you are the business) | 2–3× |
| Established trades & service businesses with a team | 3–4.5× |
| B2B / professional services, some repeat revenue | 4–5.5× |
| Distribution / wholesale with diversified customers | 3.5–5× |
| Strong recurring-revenue, contracted or SaaS-like | 5–8×+ |
What moves your multiple up — or down
Two businesses with identical EBITDA can sell for very different prices. The multiple rewards lower risk:
- Up: recurring or contracted revenue, a diversified customer base, low owner-dependence, consistent or growing profit, healthy margins, clean records, transferable systems and staff.
- Down: one customer is >20–25% of revenue, the business runs on the owner’s relationships, declining or lumpy earnings, thin margins, or messy financials that make add-backs hard to prove.
A worked example
From reported profit to enterprise value
Notice the leverage: defending an extra $100,000 of Adjusted EBITDA at 4.5× is worth $450,000 on the price. That’s why getting the add-backs right — and the multiple justified — matters so much.
Other methods (used as cross-checks)
- Asset-based: net tangible assets — a floor for asset-heavy businesses, less relevant for service firms.
- Discounted cash flow (DCF): projects future cash flows; powerful but sensitive to assumptions, so usually a sanity-check rather than the headline.
- Revenue multiples: common for high-growth tech, rare for profitable SMEs.
Get a data-driven valuation in minutes
Enter or upload three years of figures and BuyBuildSell calculates your Smart Valuation (Adjusted EBITDA × multiple on a weighted three-year average) plus a full analysis report — free during your trial.
Frequently asked questions
How is a small business valued?
Most SMEs are valued on a multiple of Adjusted EBITDA (normalised earnings), commonly 2–8x depending on size, stability and risk. Asset value and DCF are used as cross-checks.
What is a good EBITDA multiple for a small business?
2–3x for owner-dependent micro businesses, 3–5x for established service and B2B SMEs, and 5–8x+ for strong recurring-revenue businesses with low customer concentration and low owner-dependence.
What is the difference between EBITDA and Adjusted EBITDA?
EBITDA is earnings before interest, tax, depreciation and amortisation. Adjusted EBITDA adds back owner-specific and one-off costs to show the true ongoing earnings a new owner inherits.
What increases the value of my business?
Recurring/contracted revenue, a diversified customer base, low owner-dependence, growing profit, healthy margins, clean records and transferable systems all lift your multiple. Customer concentration and owner-dependence lower it.
How can I get my business valued quickly?
Enter or upload three years of figures into BuyBuildSell for an instant Smart Valuation and full report — free during your trial.
Related: How to sell your business without a broker · UK CGT & Business Asset Disposal Relief.