Two neighbors, Priya and Tom, both own service businesses. Both pull in $500,000 of SDE. One sells for $1,000,000 and the other for $2,000,000, and the gap has nothing to do with who worked harder.

So what is my business worth, really? Honestly, it depends on a number most owners never manage, which is the multiple. The earnings come from your books, but the multiple comes from a buyer’s gut feeling about whether the whole thing keeps running once you’re gone.

Same Earnings, Very Different Price

Priya Runs It All

Priya’s company runs on Priya. Customers call her cell, quotes go through her desk, and when she took a week off for her sister’s wedding, three jobs sat waiting. Buyers can feel that from across the room.

On the page from Chartwell Value, a business that runs on the owner lands at a multiple of 2. Take $500,000 of SDE times 2 and you get $1,000,000. Not a bad number, just a lot smaller than it could be, and anyone asking what is my business worth deserves to know why before a buyer explains it for them.

Tom Built a Team

Tom’s business runs on systems and a team. His crew leads handle the daily calls, there’s a binder of procedures, and a buyer could step in on a Monday without much panic. Same $500,000 of SDE, but the page puts that at a multiple of 4.

That works out to $2,000,000. The P&L for both businesses looks identical, so the multiple is where the value swings, and that’s the part nobody gets taught in school.

What the Multiple Really Is

The Market’s Price Tag

The page describes the multiple as the market’s price, expressed as the number of times SDE a buyer will pay. It rests on their confidence that the business runs without you. Think of it like a trust score you can’t see but can absolutely affect.

Most owners have never been asked to manage it. They work on revenue, they chase new clients, they watch the bank balance, and the multiple just sits there, quietly doing whatever it does.

Why the P&L Can’t Show It

The P&L covers one past year. It tells you how the business did, and it says nothing about risk. Enterprise value looks at what continues after you leave, which includes durability, customers, how easily the business can change hands, and whether the books are clean.

The page puts it neatly: the P&L isn’t wrong, it’s incomplete. Everything a buyer prices beyond profit lives in the multiple, and any fair answer has to include it.

Nine Questions Buyers Quietly Ask

The 90 Day Test

The page has a scorecard of nine questions, each scored out of 10, for a total out of 90. The first is the one that stings most owners. Could the business run for 90 days without you making a single decision?

Picture Priya on a beach for three months. Phone off. Honestly, she’d laugh, then go quiet, then reach for the phone. That tiny reaction is the answer, and it explains why her multiple sits at 2.

Revenue, Customers and Books

Other questions look at revenue quality, meaning how much of it is recurring, contracted or highly repeatable. They ask whether any single customer makes up more than 15 to 20 percent of revenue, and whether your books are clean, with add backs documented and a recast P&L a buyer can trust.

Say one customer sends Tom a fifth of his revenue. If that customer leaves after the sale, a chunk of the price goes with them, and a careful buyer will think about that before signing.

People, Systems and Position

Then comes management depth, which asks if there’s a layer of leadership below you with real authority and a track record. Documented systems matter too, such as SOPs, checklists and training material, so the knowledge isn’t stuck in one head.

The remaining questions cover growth over three years, a defensible niche or pricing power, and whether a handoff plan exists if a buyer closed next month. Nine questions, and nearly every one comes back to whether the business can live without you.

The Small Business Valuation Angle

Why Owners Hit a Wall

A proper small business valuation doesn’t stop at earnings. It asks how much risk sits in the business, which is why the same SDE can fetch a very different price from two different buyers.

Owners hit a wall when they spend years growing profit and never touch the multiple. The page calls the owner dependency ceiling a scaling risk, one that shows up when there are no systems and no second layer of leadership.

What Starting Looks Like

You don’t need to fix all nine at once. Pick the lowest score and work on that. If your books are messy, clean up the add backs. If everything runs through you, hand off one decision this month and see what happens.

It will feel awkward, sure. Delegating always does at first. Yet each small handoff is practice for the day a buyer asks about it, and that practice is what lifts a multiple from 2 toward 4. Any honest small business valuation will reward it, even if the first handoff goes a bit sideways and a client calls the owner anyway.

Questions Worth Asking Yourself

The page ends with seven questions every owner should ask. A few are about timing, like how many years you realistically have before you want or need to exit, and whether you know what your business is worth today and what it could be worth.

Others get practical. Which value driver drags your multiple down the most, and could the business run and sell without you in the room? Most owners never ask these until a buyer does, so ask them first.

Where to Start

Look at your earnings, then look hard at the multiple. If what is my business worth is a question you’ve been circling for years, score yourself honestly on the nine questions and pick the lowest one. That’s your first project.

The page also invites owners to book a Snapshot if they’d like help. Either way, treat the multiple as something you can move, because it is.

FAQs

What is my business worth if my SDE is $500,000?

It depends on the multiple. In the page’s example, a business that runs on the owner sells at 2 times, which is $1,000,000, and one that runs on systems and a team sells at 4 times, which is $2,000,000.

What is a multiple in small business valuation?

It’s the number of times SDE a buyer will pay. It reflects their confidence that the business runs without you.

What does the 90 day question mean?

It asks whether the business could run for 90 days without you making a single decision. If the honest answer is no, your multiple is probably being held down.

Does a customer concentration problem lower my multiple?

It can. The page flags any single customer above 15 to 20 percent of revenue as a risk buyers notice.