What Is My Service Business Worth? How to Get a Real Number Before You Talk to a Broker

That's how most owners find out what their business is worth. 86% of small business owners have no professional valuation or only a rough estimate, so the first real number they hear comes from a broker across a desk the year they list, and it's usually lower than the business they thought they built.

You can get the honest answer years before that, and it's simple: your business is worth its seller's discretionary earnings times a multiple, and the multiple is mostly about how much the business runs through you.

How the number gets built

What your business is worth comes down to seller's discretionary earnings multiplied by a market multiple. For most service businesses that multiple runs from roughly 1.65x for an owner-dependent business to 3.5x or higher for an owner-light one.

Take a commercial cleaning company with $590,000 of SDE. That's a sale price somewhere between $973,500 and $2,065,000.

So the number is two things: an earnings figure and a multiple. Your books mostly settle the earnings, and the multiple does the rest of the work.

The earnings figure has a name, and which one you use matters. Most service businesses get priced on SDE, not EBITDA, and the difference between SDE and EBITDA decides what a multiple even attaches to.

But the multiple isn't really pricing your earnings. It's pricing the odds those earnings survive after you leave, which is why the same SDE is worth so much more in a business that doesn't need its owner.

That part's in your control. The full mechanics of how a small business gets valued come down to where in the range a buyer puts you, and that placement comes from a read on one question: how much of last year's profit is transferable, and how much walks out the door with you?

Why you shouldn't plan around the broker's number

Start with the incentive. A broker's engaged to close a sale. Handing you an accurate figure three years early, while you still have time to move it, isn't part of the job.

Nobody's being dishonest. A broker prices your business to list it, in the window where the number's fixed and the work that could have raised it is already done.

So the broker's number is a snapshot of where you ended up. A flattering estimate gets the listing signed, and the market corrects it later when a buyer's lender prices the same earnings far more skeptically.

It also shows up without a breakdown of what's discounting it, so you can't act on it even if you wanted to. A real number does the opposite: the earnings, the multiple, and the specific distance between the multiple you have and the one your earnings could command.

What about a formal apprasial? For most owners it's the wrong first step. A valuation from a CPA runs $2,000 to $8,000, lands as a static document, and tells you nothing about what to fix, and a year later it's stale anyway.

What a working owner needs first is a number you can run again as the business changes. That's the whole game in preparing your business to sell: you want the gap on the table years early, while there's still runway to close it.

Getting a real number before you call anyone

You don't need a broker or a $3,000 appraisal to get a real starting number. You need your earnings figure and an honest read on how much the business depends on you.

That's what the Keystone diagnostic is built to do, once it opens. It asks 18 questions about how your business actually operates and returns a number calibrated against real closed transactions, which a generic calculator can't. In about four minutes you get:

• Three diagnostic scores. Your Business Independence Score, your Systems Maturity Score, and your Acquisition Attractiveness Score, a read on how owner-dependent the business is today.
• Your value range, with the most likely figure locked. Your earnings translated into a multiple and a band, the way a buyer would actually see it. Upgrading opens the figure at its centre.
• The one thing discounting it. The constraint pulling your multiple toward the bottom of the range. The full ranked list opens on a paid door.

The scores are the part a calculator can't give you. A revenue multiple doesn't know whether your customers are loyal to the company or to you. The diagnostic does, because owner-dependence is exactly what it measures.

The estimate is calibrated against 10 years of BizBuySell Insight Reports and 1.6M+ SBA 7(a) loan records, the same kind of closed-transaction data a buyer's lender leans on. The point is sequence: you get the real number, then you decide whether to sell, fix, or wait, instead of letting a listing number decide for you.

What moves it once you have it

Once you've got the number, the next question is what moves it. The answer is almost always owner-dependence, the discount a buyer applies when the business needs you to function.

On a $590,000-SDE business, closing that gap is worth $1,091,500. That's selling at $973,500 versus selling at $2,065,000, on identical earnings.

It moves in a set order, and each change moves a specific score:

1. Route daily decisions away from you (Business Independence Score). Get recurring calls, exceptions, and approvals onto a documented framework and a person who isn't you.
2. Document the operations (Systems Maturity Score). Put the knowledge on the page so a new hire can run the work without asking you how.
3. Transfer the relationships and install a manager (Acquisition Attractiveness Score). Move key accounts and vendors to the company so the business passes the absence test.

Each of those is a measured improvement, and each one shows up the next time you run the number. A business that's run without its owner for two clean years is priced near the top; one that only promises it will gets priced near the bottom.

Notice what's missing from that list. Growing revenue isn't on it, because a bigger owner-dependent business is still owner-dependent.

A bigger one can even be the worse trade. You take on the hours and the risk of more revenue while the multiple stays pinned, when the same effort spent on transferability would lift the multiple across all of your earnings at once.

And order matters as much as the work. Independence goes first, because nothing downstream is real until the business can decide without you, and that's why you want the number years early. The gap is closeable, but only with runway to install the changes and prove they hold.

So get a real number before you talk to a broker. Once the diagnostic opens, run it yourself and you'll walk into that conversation knowing the earnings, the multiple, what's discounting it, and what would raise it.

FAQ

How do I find out what my service business is worth?

You find out what your service business is worth by multiplying your seller's discretionary earnings by a market multiple, which for service businesses runs from about 1.65x to 3.5x. The free Keystone diagnostic does this in four minutes, returning three scores and your value range with the most likely figure locked calibrated against 10 years of closed-transaction data, so you get a real number before you ever talk to a broker.

How many times earnings is a service business worth?

A service business is typically worth between 1.65x and 3.5x its seller's discretionary earnings, and where it lands depends almost entirely on owner-dependence. An owner-dependent business sells near 1.65x and an owner-light one near 3.5x or higher, which on a $590,000-SDE business is a $1,091,500 spread on identical earnings.

Should I get a valuation before talking to a broker?

You should get a real number before talking to a broker, because a broker engages to close a sale, not to hand you an accurate figure with years left to move it. A diagnostic you run yourself shows the earnings, the multiple, and what is discounting it, so you walk into any broker conversation knowing your real number and what would raise it.

One thing to know first: Keystone is closed right now while the build gets finished, so the diagnostic can't be run yet. Add your name to the waitlist at https://app.trykeystone.io.

When it opens, it will give you three scores and your value range with the most likely figure locked, calibrated against 10 years of BizBuySell Insight Reports and 1.6M+ SBA 7(a) loan records. You'll see your real number and exactly what is discounting it, before a broker prices it for you.

Keystone Operator ($129/mo, $1,290/yr) will track the number month by month as you move it, and a Full Operations Modernization installs the operating layer your valuation is missing.