Same profit. Two prices.
Move the slider to your profit.
Average business
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offers averaged 3.7x pre-tax profit
Built to run without the owner
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top-scoring businesses averaged 6.6x
Gap on the same profit: {{ calc.gap }}. That gap is what this guide is about.
Multiples come from offers received by more than 10,000 businesses using The Value Builder System; companies scoring 80 or above on its eight value drivers averaged 6.6x versus 3.7x overall. [8] Illustration only, not a valuation of your company.
What is inside
Nine briefs. Read in order.
Each brief covers one decision an owner makes, usually without knowing it, that a buyer will price later. Brief 1 is open to everyone. The rest opens with your email.
Brief 1 · Open to everyone
The market you are selling into
The small business market in fall 2026 is busy and picky at the same time. In the third quarter, 2,132 U.S. businesses changed hands, about flat with the quarter before and down 7% from a year earlier, while buyer and seller confidence both slipped for a second straight year. [1]
Buyers have not gone anywhere. Asked what is holding them back, 31% said it was finding a quality business, well ahead of financing (15%) or asking prices (13%). [1] Demand is chasing a short list of companies that look safe to own.
The market split in two. Which half you land in is mostly decided before you list.
| Q3 2026 closed deals | Sold under $1M | Sold over $1M |
|---|---|---|
| {{ row.k }} | {{ row.a }} | {{ row.b }} |
Source: BizBuySell Q3 2026 Insight Report. [1] Deals over $1 million made up 22% of transactions, the highest share BizBuySell has recorded.
Read the right column carefully. Larger, cleaner businesses do not just sell for more dollars. They sell for a higher multiple of each dollar of profit, and they sell at or above asking price. Brokers in the same report said the businesses drawing attention are the ones with strong cash flow, clean records, and limited dependence on the owner. [1]
Above roughly $10 million of enterprise value, private equity data shows the same ladder. Platform buyouts of $10 million to $25 million averaged 5.9x EBITDA in the first nine months of 2025, against 10.0x for $100 million to $250 million platforms. [12] Every rung up the ladder is worth more per dollar of earnings.
What this means for you
You cannot control rates or the economy. You can control which column your company sits in. The rest of this guide is about how to move it.
Brief 2
How a buyer actually prices you
Almost every offer for a private company is a multiple of earnings. What changes from deal to deal is which earnings and which multiple.
Which earnings
- SDE (seller's discretionary earnings) is profit plus the owner's salary and perks. It is the standard measure for Main Street businesses where the buyer will run the company.
- Adjusted EBITDA is profit before interest, taxes, depreciation, and amortization, after paying a market salary to whoever runs it. It is the language of larger buyers and private equity.
- Add-backs are expenses you argue a new owner would not have: your truck, a one-time lawsuit, a family member on payroll. Every add-back a buyer rejects is multiplied against you. At a 2.7x multiple, a $10,000 add-back thrown out costs $27,000 of price.
Which multiple
Size sets the starting rung. For 2025, BizBuySell reported an average cash flow multiple of 2.61x across all closed small business deals, with a median time to close of 170 days. [16] In the private equity world, GF Data tracked deals of $1 million to $5 million averaging roughly 5.5x EBITDA, and $10 million to $25 million deals at 6.2x to 6.7x. [12]
Quality moves you up or down from that rung. Sector matters less than most owners think. Manufacturing posted the highest cash flow multiple of the major sectors in Q3 2026 at 3.02x, and restaurants sat at 2.39x, yet brokers were clear that a well-run business in a hard sector still draws buyers while a weak one struggles in a popular sector. [1]
Do this now
Rebuild your last three years of financials the way a buyer will: list every add-back with a receipt or document behind it. If you cannot prove it, assume it will not count.
Brief 3
The discounts nobody quotes you
A buyer is pricing risk to future cash flow. These are the risks they discount for most, roughly in the order they show up in diligence.
01 You are the business
If customers call your cell, if every price and hire runs through you, a buyer is buying a job. The Value Builder data in the calculator above is mostly this story: companies built to run without the owner averaged offers of 6.6x pre-tax profit against 3.7x for the average company. [8] Brokers in the Q3 2026 BizBuySell report called out owner dependence as a reason buyers stay cautious with restaurants and retail. [1]
02 One customer is too big
Many private equity firms flag any single customer above 15% of revenue. One analysis of deal outcomes put the typical discount at 0% to 5% for a top customer at 10% to 20% of revenue, 10% to 20% at 20% to 30%, and 20% to 30% above that, where most private equity buyers walk away. [11] Concentration also tends to push buyers toward earnouts, which you will see in Brief 4 is costly.
03 Books a lender will not trust
Starting October 1, 2026, SBA lenders must base repayment ability on the business's historical earnings, not projections. [1] Personal expenses run through the company and cash sales you cannot document now directly shrink what a buyer can borrow, and therefore what they can pay.
04 Revenue that has to be won again every month
Contracts, memberships, service agreements, and long customer tenure make cash flow visible. A customer with seven years of history and a fresh three-year renewal is a different risk than one who signed last quarter, even at the same size.
05 Nothing a buyer can hold
Equipment, real estate, systems, and a brand bigger than the founder give a bank something to lend against. A price built mostly on goodwill is the price a buyer can talk down, and it usually arrives with more deferred terms.
| Top customer share of revenue | Typical buyer response | Valuation impact |
|---|---|---|
| {{ row.k }} | {{ row.a }} | {{ row.b }} |
Source: Iconic, compiling broker and investment bank experience. [11] Ranges are market observations, not rules.
Brief 4
What the headline price hides
Owners compare offers by the number at the top of the letter of intent. Buyers write offers knowing that number is only partly guaranteed.
Earnouts: the data is sobering
SRS Acquiom, which administers thousands of private deals, found earnouts in 24% of 2025 private-target deals outside life sciences, up from 19% in 2014. Across deals with an earnout, sellers have collected closer to one of every five potential earnout dollars. [3] In its 2026 study the median potential earnout was 34% of the closing payment, and when an earnout paid anything, it paid about 50 cents per potential dollar. [4]
The reason is structural. Once you sell, the buyer controls hiring, pricing, and spending. Most earnout agreements protect you against bad faith, but far fewer require the buyer to run the business in a way that helps you hit the target. [4]
Two offers for the same company
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Illustrative offers. The earnout line applies the historical average payout rate from SRS Acquiom data; [3] your earnout could pay more or less. A seller note carries credit risk on the buyer.
The lower headline puts $350,000 more cash in your hands on closing day. That is the conversation most owners never have before they sign a letter of intent.
Seller financing: expected, and often refused
In BizBuySell's Q2 2026 survey, 90% of buyers expected seller financing to be part of their acquisition, but only 29% of owners planned to offer it and almost half said they would not. [2] On deals that closed, business brokers reported sellers received 83% to 92% of the price in cash at close on average, with seller financing under 10% of most deals. [10] Deciding your position before you list is cheaper than deciding it across the table.
Terms to read twice
- Working capital targets. Purchase price adjustments now appear in more than 90% of private-target deals. [17] A target set too high quietly lowers your price at closing.
- Escrows and holdbacks. Money held back for post-closing claims. Negotiate the size and the release date.
- Employment and non-compete. How long you must stay, what you are paid, and what you can do next.
- Earnout definitions. Revenue is harder for a buyer to manipulate than profit. Ask for operating covenants, acceleration if the business is resold, and a linear payout with a floor instead of all‑or‑nothing.
Brief 5
The lending rules that pick your buyer
Most buyers of businesses under a few million dollars borrow through the SBA 7(a) program. In BizBuySell's Q3 2026 survey, 78% of buyers said they expect to use SBA financing, and brokers named SBA financing the most common obstacle to closing, cited by 38%. [1] If your company does not fit SBA rules, your buyer pool shrinks before anyone sees your numbers.
Changed June 2025 · SOP 50 10 8
- Buyers must inject at least 10% equity on a change of ownership. [9]
- A seller note counts toward that injection only if it is on full standby, with no principal or interest paid for the life of the SBA loan, typically 10 years, and only up to half of the injection. [9] On a 10% requirement, that caps your note's role at 5% of the project.
- A seller who keeps any equity must personally guarantee the loan for two years, which in practice ends most rollover structures in SBA deals. [9]
Do this now
Ask an SBA lender to pre-qualify your business before you list. In Q3 2026, 86% of buyers said prequalification matters to them. [1] If you are above the SBA's reach, plan for strategic acquirers, private equity, search funds, family offices, or a fund like Back 9, which brokers report seeing more of this year.
Brief 6
Taxes, structure, and where you live
The number that matters is what you keep. Structure usually moves that number more than any single rate.
Asset sale or stock sale
Buyers usually prefer to buy assets: they get a stepped-up tax basis and leave old liabilities behind. Sellers usually prefer to sell stock or membership interests and pay long-term capital gains on the whole gain. In an asset sale, part of your price can be taxed as ordinary income, for example depreciation recapture on equipment, and a C corporation selling assets can be taxed twice. How the price is allocated across assets is negotiated, and it is worth real money to both sides.
Qualified small business stock after 2025
The One Big Beautiful Bill Act, signed July 4, 2025, expanded Section 1202 for C corporation stock acquired after that date: 50% of gain excluded after three years, 75% after four, 100% after five, with the cap raised from $10 million to $15 million or 10 times basis, whichever is greater. [13] Stock you already own keeps the old rules. If you are early in the runway and organized as an LLC or S corporation, the entity question is worth a conversation with your CPA now, not the year you sell.
Installment treatment
Payments you receive over time, such as a seller note, can generally be taxed as they are collected rather than all in the year of sale. That spreads the gain, but it also means your tax plan depends on the buyer paying.
State taxes: Mississippi and Alabama
Mississippi taxes capital gains as ordinary income at a flat rate, 4.0% for 2026 on income above $10,000. Under H.B. 1, signed in March 2025, the rate steps down to 3.75% in 2027, 3.5% in 2028, 3.25% in 2029, and 3.0% in 2030, with further cuts possible after that if revenue targets are met. [14] On a $2 million gain, closing in 2027 instead of 2026 saves about $5,000 in state tax. Real, but small next to the structure decisions above. Do not let a quarter-point drive your timeline.
Alabama also taxes capital gains as ordinary income under its graduated individual rates. Owners in other states should confirm current treatment, deductions, and any local taxes with a CPA.
Your team
Bring a CPA and a transaction attorney in before the letter of intent, not after. Once you sign an LOI, most of the structure is already agreed.
Brief 7
The exit you did not choose
The Exit Planning Institute's surveys find roughly half of owner exits are not voluntary, triggered by one of the five Ds: death, disability, divorce, disagreement, or distress. [7] An unplanned exit almost always sells at the left column of the table in Brief 1, on a buyer's timeline.
The documents that protect value
- A buy-sell agreement that says who buys an owner's share, at what price formula, and how it is funded. Update the valuation method every few years.
- Key person and buyout insurance sized to the real value of the business, not the value from ten years ago.
- A written continuity plan: who signs checks, who calls the top ten customers, and where the passwords are, if you are out for 90 days.
- Estate documents that match the business plan, so heirs are not forced to sell in a hurry.
- A disability definition in your agreements. Does a temporary disability trigger a buyout? Most owners have never checked.
Every one of these also makes the business easier to sell on purpose.
Brief 8
Life after the wire
The most quoted number in exit planning is not financial. The Exit Planning Institute cites PwC research that 75% of owners profoundly regret selling within a year. [5] The same body of research points to missing personal planning as the main driver: the identity, routine, and community the business provided disappear on closing day.
Readiness is still rare. In EPI's 2023 national survey, 78% of owners had not formed a formal exit planning team, [5] and in its 2025 generational report only 5% of Baby Boomer owners had a dedicated team, even though over half expected to exit within a few years. [6] Boomers own an estimated 2.34 million businesses with employees, employing 24.7 million people. [15] Many of those exits will land in the same few years, competing for the same buyers.
Three questions to answer before you sell
This is also where the proceeds come in. A sale converts one concentrated asset into cash that has to be put to work. Planning that next chapter is part of the exit, not something to start after it.
Brief 9
The 36-month runway
Three years lets you fix the items that move price the most and still show a buyer a clean, consistent track record. Here is the order we use with owners.
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Your readiness score
Answer honestly. Your result updates as you go, with the briefs that matter most for your answers.
Your result
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References
Sources
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