The price is the earnings a buyer credits, multiplied by what they will pay for earnings like yours. Both halves are estimable, and both are moved by things a seller can influence in the year before a sale.
Get quotes to sell my business
How much do businesses sell for? The earnings a buyer credits
For a small business, seller's discretionary earnings: profit plus the owner's compensation plus documented personal expenses. For anything larger, adjusted earnings after paying a market salary for the owner's work. Every adjustment needs evidence; an unevidenced add back is removed and casts doubt on the rest of the file.
What moves the multiple
How much of the earnings survive your departure, how repeatable the revenue is, customer concentration, contract transferability, lease security and the state of the equipment. Two businesses with identical profit routinely sell for very different numbers because of these, and they are where preparation pays.
What can I sell my business for? Getting an estimate you can rely on
Find completed transactions in your trade at your size rather than asking prices. Ask two or three intermediaries what they would expect and, more importantly, why. A number with reasoning behind it can be tested; a number without reasoning is a pitch to win your mandate.
Other questions people ask
Is there a rule of thumb for my trade?
Trade rules of thumb exist and are a starting point at best. They ignore owner dependence and concentration, which are usually the largest factors.
Does the price include my property?
Only if you sell it. Many sellers keep the building and lease it to the buyer, which produces an income and widens the buyer pool.
What if I owe money on equipment?
Finance is settled at closing out of the proceeds, so it reduces what you receive rather than what the business is worth.
Do buyers pay for potential?
Rarely, and never much. Buyers price the record and treat the plan as their own upside, which is why a year spent improving the record returns more than a persuasive forecast.
How much do you sell a business for in practice?
For a multiple of the earnings a buyer credits rather than the profit you report, so the answer starts with which earnings figure applies at your size. Two businesses with identical profit routinely sell for very different amounts, and what separates them is how much of the earnings survive the owner's departure.