Overview: 

There are countless methods to value a business. However, when it comes to  small business sales, most transactions involve owner-operators much like the  seller — individuals looking to step into the business and continue its operation.  In these cases, there are four key factors that consistently drive business value: 

1. Historical Business Cash Flow 

Valuation is typically based on a multiple of Seller’s Discretionary Earnings (SDE), a  measure of the cash flow available to a new owner-operator. This multiple varies  by industry, deal size, and perceived risk, but commonly falls between 2–4X SDE. 

2. Consistency 

Buyers closely examine financial trends, seeking predictable and stable revenues  and cash flow. Businesses with consistent performance and minimal volatility  tend to attract stronger buyer interest and command higher valuations. 

3. Time in Business 

Longevity matters. The longer a business has been established, the more likely it  has built strong customer relationships, reliable vendor partnerships, and an  experienced employee base — all factors that reduce risk and increase value. 

4. Level of Owner Involvement 

Buyers and lenders assess how dependent the business is on the current owner. A  business with a capable team, delegated responsibilities, and documented  processes is typically easier to transition and more attractive to buyers. 

Conclusion: 

While every business is unique, these four value drivers consistently influence  outcomes in small business sales. Proactively managing these areas can 

significantly impact both marketability and sale price. If you’d like to better  understand your business’s current market value or explore timing for a future  exit, I’d be happy to assist.