How Much Is My Business Worth?

Most business owners get this number wrong. A Broker's Opinion of Value shows you why, and what buyers would actually pay.

The Guess That Costs You Money

A business owner in the Sacramento area called me last year. He'd done some research online, looked at what a competitor had listed for, and came up with a number he thought was reasonable. He wasn't being reckless about it. He'd put real thought into it.

His number was off by several hundred thousand dollars. He'd undervalued his own business.

I see this constantly. Over the past four years, I've prepared more than 100 Broker's Opinions of Value for businesses across all kinds of industries: HVAC, dental labs, fitness, transportation, construction, professional services. The pattern is always the same. Owners either overvalue their business because they've poured years of work into it and feel it should be worth more, or they undervalue it because they're guessing based on incomplete information.

That guess, in either direction, has real consequences. Price too high and serious buyers walk away. Price too low and you leave real money on the table.

What a Broker's Opinion of Value Actually Is

A Broker's Opinion of Value (BOV for short) is a professional assessment of your business's estimated fair market value. It's not a formal appraisal (you'd need one of those for tax, legal, or lending purposes), but it answers the question that matters most when you're thinking about selling: what would a qualified buyer likely pay for this business under current market conditions?

Here's what goes into one and why it matters. I've published a sample BOV on our website that walks through a fictional Sacramento HVAC company called "Capital City HVAC." The company isn't real, but the methodology is identical to what I use with actual clients. [Download it here] and follow along as I break down the key sections.

Why SDE Matters More Than Your Bottom Line

The most important number in a small business valuation isn't revenue. It's Seller's Discretionary Earnings (SDE).

SDE is the total financial benefit available to a single owner-operator. You start with net income before taxes, then add back expenses that are specific to the current owner: your salary, health insurance, retirement contributions, vehicle costs running through the business, depreciation, loan interest, and other personal expenses on the company books.

In the sample BOV, the fictional company reported $500,000 in net income for its most recent year. After the add-backs (owner compensation, vehicle expenses, insurance, retirement, depreciation) the SDE came to $827,280. That's the number a buyer is actually evaluating.

And that's where most owners get it wrong when they try to value their own business. They look at net profit and multiply by some number they found on Google. But a buyer isn't purchasing your net profit. They're buying the total economic benefit they'll take home as the new owner. Those are very different figures.

What Determines the Multiple

Once you know the SDE, the next piece is the multiple, the factor applied to SDE to arrive at a valuation range.

Your multiple is shaped by the specifics of your business: what industry you're in, your revenue size and growth trend, how dependent the operation is on you, the quality of your recurring revenue, customer concentration, documented processes, and the competitive dynamics of your buyer pool.

In the sample BOV, the multiple ranged from 3.0x to 4.35x depending on buyer type. At 3.0x, the valuation came to roughly $2.5 million. At 4.35x, it approached $3.6 million. That's over a million-dollar difference, driven by the specific characteristics of the business and the type of buyer at the table.

Online "business valuation calculator" tools can't account for any of that. They don't know whether you've built a management team, documented your standard operating procedures, locked in recurring service contracts, or whether there's a strategic buyer out there who'd pay a premium for your customer base. A professional BOV does.

What Else the Report Covers

A well-prepared BOV goes deeper than a single number. Here's what the sample report includes, and what you should expect from any professional valuation:

Financial analysis. Three years of revenue, costs, and SDE with trend lines. In the sample, SDE grew 46.7% over three years while operating expenses barely moved. That kind of growth trend directly influences what a buyer is willing to pay.

Buyer scenarios. Most businesses attract different types of buyers, and those buyers pay different prices. The sample models two: an individual using SBA financing and a strategic acquirer such as a private equity-backed platform. Knowing both scenarios helps you set realistic expectations.

Industry context. Market conditions in your industry affect what buyers will pay. The sample includes growth projections, consolidation trends, and risk factors. The IBBA's Market Pulse research consistently shows that businesses with clean financials, strong operations, and growth behind them sell for more and attract more serious buyers.

Market comparables. Think of these as the business equivalent of real estate comps. Recent transactions and current listings for businesses in the same industry and revenue range that validate the valuation.

Strengths and risks. An honest assessment of what drives the multiple higher and what brings it lower. In the sample, strong margins and recurring revenue supported a higher value. Owner involvement in sales and customer concentration worked against it. You need to know both sides.

A Valuation Isn't Just for Selling

Most owners assume they only need a valuation when they're ready to list. I'd push back on that.

If you're planning to sell soon, a BOV gives you a defensible asking price and tells you which buyer types to pursue. It also shows you weaknesses worth addressing before you go to market. Understanding how Sacramento business valuations work is the foundation of every successful sale I've managed.

If selling is years away, the BOV becomes a planning tool. It shows you exactly what's driving value and what's holding it back. If the valuation identifies owner-dependence as a problem, you know to invest in building a management layer. If customer concentration is a risk, you have time to diversify your revenue base.

I've had owners take their first BOV, spend two or three years addressing the specific issues it identified, and come back with a meaningfully higher valuation. That kind of intentional work is exactly what I mean by preparing to sell even when you're not ready yet.

My recommendation: get a professional valuation every year, whether you're planning to sell or not. Markets shift. Your financials change. Knowing where you stand today shapes every major decision you make about the business and your exit strategy down the road.

What a BOV Won't Do

A BOV is not a promise of what your business will sell for. Final sale price depends on buyer demand, deal structure, financing, negotiation, and timing. And as I mentioned above, it's not a formal appraisal, so it's not something you'd submit to a lender or use for tax planning.

But owners who start with solid data make better decisions at every stage. They don't leave money on the table because they were guessing.

See What Your Business Is Worth

If you haven't already, [download the sample] to see the level of detail and analysis that goes into every valuation I prepare. It covers a fictional Sacramento company, but the structure and methodology are what I use for real clients in every industry I work with.

If you're wondering what your business might be worth, whether you're thinking about selling this year or five years from now, I'd welcome the conversation. Request a confidential Assessment of Value and let's find out where you stand.