How do you value what a small business is worth?

Valuing a small business generally means calculating its normalized earnings, applying an industry-appropriate multiple, and cross-checking that figure against the company's assets and comparable sale prices, with the final concluded value reconciled across all three approaches.

The income approach starts with the business's cash flow. For owner-operated businesses, that usually means Seller's Discretionary Earnings (SDE); for larger companies, it's typically EBITDA. To get there, we normalize the financials by adding back owner salary, personal expenses run through the business, and one-time or non-recurring costs, then apply a market-derived multiple or discount rate. The right multiple depends on industry, growth trajectory, customer concentration, and the quality of the company's records, so a credible valuation never applies a generic rule of thumb.

The market approach compares the business to actual sales of similar companies, when reliable transaction data exists. The asset approach totals the fair market value of equipment, inventory, and other assets, then subtracts liabilities; this matters most for asset-heavy businesses and can set a practical floor on value.

A defensible report doesn't lean on just one method. It reconciles income, market, and asset-based results into a single supportable conclusion, documented in enough detail to hold up with the IRS, an SBA lender, a court, or a prospective buyer.

For a straightforward, quick estimate on a specific revenue figure, see how much a business worth $300,000 a year is generally valued at. If you need a formal, USPAP-compliant valuation for a sale, financing, or tax purpose, Equity Business Valuation Services can prepare one for your San Francisco Bay Area business.