What’s My Business Worth? A 2026 Owner’s Guide to Honest Valuation

‘What’s my business worth?’ is the most-asked question in lower-middle-market M&A. And the most-misanswered. Most owners are off by 30-50% on the actual market value — some too high (‘I’ve put 25 years into this; it must be worth $20M’), some too low (‘the local guy who tried to buy me offered $3M, so that’s probably what it’s worth’). Both miss the actual number by a wide margin.

There’s a structured way to get close to reality in five minutes. Adjusted EBITDA × industry multiple ± working capital adjustment = estimated equity value. The math is simple. Getting the right inputs takes a little more work — but a free calculator at ctacquisitions.com/survey walks you through each input with industry benchmarks. The output is a range, not a point. But the range is usually within 15-25% of what a real sale process would produce.

This guide covers four use cases: (1) The 5-minute estimate — how to do it yourself with the free calculator. (2) The 60-minute deeper dive — how to score yourself on the six factors that decide your multiple. (3) When to invest in a paid formal valuation. (4) When to skip valuation work entirely and just go to market with an M&A advisor.

The most expensive mistake is acting on a wrong number. Owners who think their business is worth $15M when it’s actually worth $9M waste 18-24 months chasing a price the market won’t support — sometimes letting the business decline in the meantime. Owners who think their business is worth $4M when it’s actually worth $7M sell to the first interested buyer at half the real price. A 5-minute calculator at ctacquisitions.com/survey is the cheapest insurance policy you can buy against either mistake.

“Most owners are off by 30-50% on what their business is actually worth — some too high, some too low. A five-minute calculator is more accurate than a year of guessing.”

Key Takeaways

• The fastest honest valuation: Adjusted EBITDA × industry multiple, adjusted for working capital and net debt. Most owners can get within 25% of market value in 5 minutes with a structured calculator.
• Industry sets the band (e.g., home services 4-6x, manufacturing 5-7x, SaaS 8-15x). Six quality factors decide where in the band you land — the spread is typically 50-100%.
• Free calculator at ctacquisitions.com/survey takes 5 minutes and produces a defensible range for early-stage planning, reality-checking, or deciding whether to invest in pre-sale growth.
• Formal valuations from BVR-certified appraisers cost $3,000-15,000 and take 4-8 weeks. They’re necessary for legal/tax purposes (estate, divorce, partnership buyout) but optional for pre-sale planning.
• Most owners are 30-50% off on their estimate — in either direction. The biggest cost of being wrong is wasted time: 18-24 months chasing an unrealistic price, or selling too cheap to the first buyer.
• If you’re within 12 months of selling, the calculator output plus a conversation with an M&A advisor (free) is usually sufficient. A formal valuation is rarely needed for the sale itself — the market sets the price.

The 5-minute estimate: free calculator approach

The fastest honest estimate uses three inputs: Adjusted EBITDA, your industry, and a few questions about the quality of your business. The free calculator at ctacquisitions.com/survey walks through each input, applies the appropriate industry multiple band, adjusts for the six quality factors, and produces an estimated equity value range. It takes about 5 minutes.

Input 1: Adjusted EBITDA. Start with reported EBITDA from your trailing twelve months. Add back legitimate owner-discretionary expenses (compensation above market, personal expenses run through the business, one-time costs that won’t recur post-sale). The result is adjusted EBITDA — what a buyer will use to value your business. Most owners have $50-300k of legitimate add-backs; some businesses have more. If you don’t know what counts, the calculator includes a checklist.

Input 2: Industry. Pick the industry that best describes your dominant revenue stream. Home services. Manufacturing. Healthcare services. Professional services. Distribution. SaaS. Tech services. E-commerce. Construction. Each industry has a typical lower-middle-market multiple band. The calculator applies the right band based on your selection.

Input 3: Quality factors. The calculator asks 5-7 questions about the quality of your business: revenue growth rate, recurring revenue percentage, largest customer concentration, owner involvement in daily operations, end-market trajectory, and a few others. Each answer adjusts your position within the industry band. The output is a range — typically ± 15-20% of a midpoint — reflecting the uncertainty in any pre-sale estimate.

The 60-minute deeper dive: scoring yourself on the six factors

If you want a more nuanced estimate, score yourself on the six drivers explicitly. These are the factors buyers actually use to decide where in your industry band your business sits. Each factor moves the multiple by roughly 0.25-0.5 turns of EBITDA. Six positives push you to the top of the band; six negatives push you to the bottom. Most businesses are mixed.

Factor 1: EBITDA size. Under $1M: lower-middle-market entry, often SDE-priced. $1-3M: lower band of industry multiple. $3-7M: mid to upper band, sweet spot for many PE platforms. $7-15M: upper band, multiple buyer pools competing. $15M+: often above-band, premium multiples. Size is one factor that’s hard to fix quickly — you generally have to grow into the next tier.

Factor 2: Growth rate. Trailing 3-5 year revenue CAGR. Flat or declining (0-5%): bottom of band. Modest (5-10%): mid band. Healthy (10-20%): upper band. High (20%+): top of band, sometimes above. Quality of growth matters too: organic growth (existing customers buying more, new customer acquisition through normal channels) is worth more than acquisition-fueled growth or one-time price increases.

Factor 3: Recurring revenue. Percent of revenue that’s contracted, subscription, or maintenance-based. Under 20%: bottom of band. 20-40%: mild premium. 40-60%: solid premium. 60%+: top-of-band valuations. Recurring revenue is the single biggest individual lever — worth 1.5-2 turns of EBITDA in most industries when you go from 15% to 60%.

Factor 4: Customer concentration. Largest single customer as a percentage of revenue. Under 10%: no discount, often a premium. 10-20%: minor discount. 20-30%: meaningful discount (0.5-1 turn). 30%+: significant discount (1-2 turns), sometimes deal-breaking. 50%+: most buyers walk away. Concentration is the most common multiple-killer in lower-middle-market deals.

Factor 5: Management depth. Does the business run without the owner? If yes (you can take 4 weeks of vacation, have a hired GM/COO, decisions are made by functional leaders): premium of 0.5-1 turn. If no (you make all key decisions, customer relationships run through you, vendors call you personally): discount of 0.5-1 turn. This factor is worth fixing 18-24 months before sale by hiring a general manager.

Factor 6: Market position and end-market quality. Are you a leader, challenger, or follower? In a growing, stable, or declining market? Leaders in growing markets get the high end of the band. Followers in declining markets get the low end. Most businesses are challengers in stable markets, putting them in the middle. Niche leaders — small market but you dominate it — often get premium multiples even above the typical band.

Worked example: estimating value with the calculator

Example 1: A $1.5M EBITDA HVAC business in the Sunbelt. Industry: home services (band: 4-6x). Adjusted EBITDA: $1.5M. Growth: 12% CAGR over 3 years. Recurring revenue: 45% (mix of maintenance contracts and service agreements). Largest customer: 8% of revenue (residential customer base, no concentration). Management depth: owner has hired a service manager but still makes pricing and hiring decisions. Market position: top 5 in metro, market is growing 6-8%/year. Score: positive on growth, recurring, concentration, and market. Mixed on management. Result: upper band, ~5.5x. Estimated enterprise value: $8.25M. Less $200k of debt + $50k excess cash adjustment = $8.1M equity value.

Example 2: A $4M EBITDA SaaS business with churn issues. Industry: SaaS (band: 8-15x EBITDA, or 3-10x ARR). Adjusted EBITDA: $4M on $12M ARR. Growth: 18% ARR CAGR. Net revenue retention: 95% (some churn, modest expansion). Largest customer: 22% of revenue. Management depth: founder still runs sales; engineering led by CTO. Market position: top 5 in vertical SaaS niche, market growing fast. Score: positive on growth and market. Negative on NRR (95% is below the 110%+ that earns premium SaaS multiples) and customer concentration. Mixed on management. Result: lower-mid SaaS band, ~9x EBITDA / 3x ARR. Estimated enterprise value: $36M. Less $1M debt = $35M equity value.

Example 3: A $750K EBITDA professional services firm (founder-dependent). Industry: professional services (band: 4-7x). Adjusted EBITDA: $750k. Growth: 5% CAGR (mature). Recurring revenue: 25% (some retainer clients; rest project-based). Largest customer: 28% of revenue. Management depth: founder is the rainmaker, generates most new business. Market position: small player in mid-tier consulting. Score: weak on growth, recurring, concentration, management. Mid on market. Result: bottom of band, ~3.5-4x. Estimated enterprise value: ~$2.6-3M. Plus expected earn-out structure (founder transition risk). Likely structure: $1.5-2M cash at close + $1M earn-out over 3 years.

What these examples show: Even back-of-envelope math gets you to a defensible range. The numbers won’t be exact — they’re ± 15-25% of what a real process would produce — but they’re close enough to support real decisions. Should you go to market now? Should you wait 18 months to fix recurring revenue? Should you accept the offer in front of you? The free calculator at ctacquisitions.com/survey produces this kind of estimate in under 5 minutes.

Industry multiple bands in 2026

Use this table to find your industry’s typical multiple range. Bands reflect 2026 lower-middle-market deal pricing for businesses in the $1-25M EBITDA range. The low end represents weaker examples (commodity, owner-dependent, concentrated). The high end represents strong examples (differentiated, well-managed, diversified). Your business will land somewhere in the band based on the six-factor score.

Read each band as the conversation, not the conclusion. If your industry is ‘manufacturing 5-7x’ and your business has $3M EBITDA, the conversation is whether you’re a $15M deal (5x) or a $21M deal (7x). The conclusion comes from real diligence and a real process. The table tells you the planning range — not your final number.

The math: from EBITDA multiple to equity proceeds

The multiple gives you Enterprise Value, not Equity Value. Enterprise Value (EV) = Adjusted EBITDA × Multiple. To get Equity Value (the amount the seller actually receives at close), you adjust for working capital and net debt. The standard formula: Equity Value = Enterprise Value − Debt + Excess Cash ± Working Capital Adjustment.

Working capital adjustment: Most deals include a working capital peg — a target level of working capital the seller delivers at close. If actual working capital at close is above the peg, the seller gets paid extra; if below, the seller refunds the difference. The peg is typically based on the average working capital over the trailing 12 months. The adjustment can move equity value ± 5-15%.

Net debt: Subtract any debt the buyer is not assuming (term loans, bank lines, equipment financing, capital leases). Add cash above what’s needed for normalized operations. Most lower-middle-market deals are ‘cash-free, debt-free’ — the seller takes all cash above operating needs and pays off all debt at close. Net debt for typical deals: $0.5-3M of debt; $0.1-1M of excess cash.

Worked example of the full math: Adjusted EBITDA: $2M. Industry multiple (mid-band home services): 5x. Enterprise Value: $10M. Less assumed debt: $1.5M. Plus excess cash: $300k. Working capital at peg: $0 adjustment. Equity Value at close: $8.8M. Note: this is the gross proceeds — before transaction fees (1-3% of price for M&A advisor + legal + accounting), taxes (cap gains on most of it, ordinary income on some allocations), and any escrow holdback (typically 5-15% held back for 12-24 months).

When to use a free calculator vs. a paid formal valuation

Free calculators are right for most pre-sale planning. Use the free calculator at ctacquisitions.com/survey when you’re: (1) early-stage thinking about exit (1-3 years out), (2) reality-checking your own assumptions about what your business is worth, (3) deciding whether to invest in growth or fixing factors before sale, (4) preparing for a conversation with an M&A advisor, or (5) just curious about the range. The output isn’t a defensible legal document — but it’s within 15-25% of what a real process would produce, and it costs nothing.

Paid formal valuations are right for legal/tax purposes. Get a formal valuation from a BVR-certified business appraiser (Business Valuation Resources is the major credential body) when you need a defensible number for: (1) estate planning and gift tax filings, (2) divorce or partnership buyouts, (3) employee stock ownership plan (ESOP) transactions, (4) IRS or court purposes, (5) buy-sell agreement triggers. These valuations cost $3,000-15,000 depending on business size and complexity, take 4-8 weeks, and include a 50-100 page report.

Formal valuations are usually NOT needed for an actual sale. When you go to market with an M&A advisor, the actual sale price comes from competitive bidding among buyers — not from any formal valuation. The market sets the price. A formal valuation done before sale won’t bind buyers and may not even be relevant to the price they offer. Most experienced M&A advisors will tell you: skip the formal valuation, use the free calculator for planning, and let the market price the business through a real process.

Hybrid approach: free calculator + M&A advisor consultation. The most common path for owners who are 6-18 months from selling: (1) Run the free calculator at ctacquisitions.com/survey for an initial estimate. (2) Have a free 30-60 minute consultation with an M&A advisor. The advisor can refine your estimate based on private comps they’ve seen in your industry, advise on whether to fix factors before sale, and tell you what process would maximize value. This combination costs nothing and is more useful than a $5,000 formal valuation for sale-planning purposes.

When formal valuations are worth the money

Estate planning and gift tax purposes: If you’re gifting business interests to family members or trusts, the IRS requires a defensible valuation for the gift tax filing. A BVR-certified appraiser produces a report that’s defensible if challenged. Cost: $5,000-12,000 depending on complexity. The cost is usually trivial compared to the tax savings (gift tax exemptions, valuation discounts for lack of marketability, valuation discounts for minority interests).

Divorce and partnership buyouts: When the business is being divided in a divorce or one partner is buying out another, both sides need a defensible number. Often both sides hire their own appraisers (each costs $5,000-15,000) and negotiate the difference. The process can take 3-6 months but produces a number that holds up in court if litigation occurs.

ESOP transactions: Employee Stock Ownership Plan transactions require an annual valuation by an independent appraiser — per ERISA and IRS requirements. The first valuation establishes the share price at ESOP creation; subsequent annual valuations track changes. Cost: $7,000-20,000 per year for ongoing ESOP businesses. This is non-optional for ESOP-owned companies.

Buy-sell agreement triggers: Many business partnerships have buy-sell agreements that trigger on specific events (partner death, disability, divorce, retirement). The agreement usually specifies how the business is valued — sometimes by formula, sometimes by formal appraisal. If the trigger event occurs and the agreement specifies a formal valuation, you’ll need a BVR-certified appraiser. Cost: $3,000-12,000.

Common mistakes owners make in valuing their business

Mistake 1: Using public-company multiples. ‘The HVAC industry trades at 14x EBITDA — my business is worth $28M.’ No. That 14x is a public-company multiple for a $500M+ EBITDA national operator with brand premium, liquidity premium, and capital-markets access. Your $2M EBITDA private business doesn’t qualify for any of those premiums. Lower-middle-market private multiples run 30-60% lower than public comps. Always benchmark against private comps in your size band.

Mistake 2: Using outdated rules of thumb. ‘My business should sell for 1x revenue — that’s the rule of thumb.’ Maybe in some industries 30 years ago. Today, multiples are calculated on adjusted EBITDA (or SDE for the smallest businesses), not revenue. Revenue-based rules of thumb can be off by 50-200% from market reality. Use industry-specific EBITDA multiples for any meaningful estimate.

Mistake 3: Adding back too much. Owners often run aggressive add-back lists trying to inflate adjusted EBITDA. Buyers reject most aggressive add-backs in diligence. Common rejected add-backs: family member salaries above market for the role they actually do, partial owner travel (only the personal portion is legitimate), ‘one-time’ expenses that recur every year. A quality of earnings will strip out the aggressive add-backs and your final price will be based on the conservative number.

Mistake 4: Ignoring working capital and debt. ‘The multiple gave me $10M, so that’s what I’ll pocket.’ Wrong. After working capital adjustment, debt payoff, transaction fees, taxes, and escrow holdback, the cash you actually receive at close is typically 60-75% of the headline enterprise value. A $10M EV deal often means $6-7M in your pocket at close, plus potentially another $1-2M from escrow over the next 12-24 months.

Mistake 5: Not running the calculator at all. Many owners avoid running any structured estimate because they’re afraid of bad news. They go to market with an inflated mental anchor and end up disappointed when offers come in 30-40% lower. Or they sell to the first buyer who offers something credible — often 30-40% lower than what a competitive process would have produced. Either mistake costs hundreds of thousands or millions of dollars. The 5-minute calculator at ctacquisitions.com/survey is the single highest-ROI five minutes you can spend before considering a sale.

What to do after you have an estimate

If the estimate is much higher than you expected: Validate with a second opinion. Talk to an M&A advisor for a free consultation; ask for 5-10 closed comps in your industry/size band. If the estimate holds up, you may be ready to go to market sooner than you thought. Don’t over-invest in pre-sale improvements if you’re already at a strong number.

If the estimate is much lower than you expected: Identify which factors are dragging you down. Three are improvable in 12-24 months: recurring revenue, customer concentration, management depth. The other three (size, growth, market position) are harder to change. If a fixable factor is costing you 1-2 turns of EBITDA, the multiple expansion from fixing it usually justifies a 12-24 month delay before going to market. Run the math: cost of waiting (forgone proceeds, opportunity cost) vs. expected uplift from fixing the factor.

If the estimate is roughly what you expected: Start the actual process. Talk to 2-3 M&A advisors, get their views on positioning and process design, decide whether to use a sell-side investment banker or a smaller boutique. Begin assembling the documentation a buyer will want: 5 years of financials, customer concentration data, operating metrics, organizational chart, contracts. The earlier you start preparing, the smoother the eventual process.

If the estimate is unclear or uncertain: Some businesses are hard to estimate with a calculator — unique business models, multiple revenue streams, transitional financials (recent acquisition, recent restructuring), or specialty industries without clean comps. For these cases, talk to an M&A advisor or get a paid formal valuation from a BVR-certified appraiser. The calculator works for 80% of lower-middle-market businesses; the other 20% need a more tailored approach.

Conclusion

‘What’s my business worth?’ doesn’t need to be a mystery. A 5-minute calculator at ctacquisitions.com/survey gets you within 15-25% of market reality — close enough to support real decisions about whether to sell now, invest in growth first, or fix specific factors. The math is simple: adjusted EBITDA × industry multiple, adjusted for working capital and net debt, with the multiple positioned within your industry band based on six quality factors. The biggest mistake owners make isn’t getting a slightly wrong number — it’s acting on no number at all. Owners who anchor on inflated mental estimates waste 18-24 months chasing prices the market won’t support. Owners who anchor on lowball estimates sell to the first buyer at half the real price. A 5-minute calculator is the cheapest insurance against either mistake. For most pre-sale planning, that calculator + a free conversation with an M&A advisor is sufficient. Formal valuations from BVR-certified appraisers ($3,000-15,000) are warranted for estate, divorce, ESOP, and buy-sell purposes — but rarely for actual sale planning. The market sets the sale price. Your job is to know the range before you go to market and to position the business so the sale price lands at the top of the range, not the bottom.

Frequently Asked Questions

How do I know what my business is actually worth?

The fastest honest estimate: adjusted EBITDA × industry multiple, adjusted for working capital and net debt. The free calculator at ctacquisitions.com/survey walks through this in 5 minutes and produces a range typically within 15-25% of what a real sale process would produce. For more precision, talk to an M&A advisor who can validate against private comps in your industry/size band.

Is there a free business valuation calculator I can use?

Yes. ctacquisitions.com/survey is a free 5-minute calculator that asks for your adjusted EBITDA, industry, and a few quality questions, then produces an estimated equity value range based on 2026 lower-middle-market multiples. The output isn’t a legal document, but it’s suitable for pre-sale planning, reality-checking your own assumptions, and deciding whether to invest in growth before sale.

How accurate are free online business valuation calculators?

Good ones (like the free calculator at ctacquisitions.com/survey) produce estimates within 15-25% of what a real competitive sale process would generate. The accuracy depends on the quality of inputs (correct adjusted EBITDA, correct industry classification, honest scoring of quality factors). They’re not a substitute for formal valuation when you need a defensible legal/tax number, but they’re sufficient for most pre-sale planning.

When should I pay for a formal business valuation?

When you need a defensible number for legal/tax purposes: estate planning and gift tax filings, divorce or partnership buyouts, ESOP transactions, IRS audits, or buy-sell agreement triggers. Cost: $3,000-15,000 from a BVR-certified appraiser; takes 4-8 weeks. NOT typically needed for an actual sale — the market sets the price through competitive bidding, not through pre-sale formal valuations.

How much does a formal business valuation cost?

$3,000-15,000 from a BVR-certified appraiser, depending on business size and complexity. Smaller, simpler businesses are at the low end ($3-5k). Larger, multi-entity, complex businesses are at the high end ($10-15k). The valuation takes 4-8 weeks and produces a 50-100 page report defensible for IRS, court, and ESOP purposes.

What’s the difference between enterprise value and equity value?

Enterprise Value (EV) is the multiple-derived business value: Adjusted EBITDA × Multiple. Equity Value is what the seller actually receives: EV − debt + excess cash ± working capital adjustment. On a $10M EV deal, the seller’s equity proceeds at close are typically $7-9M after debt payoff and working capital. After transaction fees, taxes, and escrow holdback, the cash actually pocketed at close is often 60-75% of EV.

How is adjusted EBITDA calculated?

Start with reported EBITDA. Add back legitimate owner-discretionary expenses: compensation above market for an outside CEO, personal expenses run through the business (cars, travel, family salaries beyond market), one-time non-recurring costs (legal settlements, restructuring, COVID-era anomalies). Don’t add back things that will continue post-close: normal CEO compensation, recurring expenses just because they’re large, or routine costs framed as ‘one-time.’

Why are owner estimates of business value usually wrong?

Three reasons: (1) Owners use public-company multiples (which run 30-60% higher than private lower-middle-market multiples). (2) Owners overweight emotional value (years of work, sacrifice, sentiment) and underweight what buyers actually pay for. (3) Owners don’t score themselves on the six quality factors, so they don’t know if they’re a 4x business or a 6x business in their industry band. Most owners are off by 30-50% in either direction.

What multiple should I use for my industry?

For 2026 lower-middle-market deals: Home services 4-6x, manufacturing 5-7x, healthcare services 5-9x, professional services 4-7x, distribution 5-7x, SaaS 8-15x EBITDA (or 3-10x ARR), tech services/MSP 6-8x, e-commerce 3-5x, construction 3-5x, food & beverage 4-6x. The free calculator at ctacquisitions.com/survey applies the right band for your industry and adjusts based on quality factors.

How long before selling should I start estimating value?

1-3 years. Earlier estimates let you identify factors that are dragging you down and fix the ones that are fixable (recurring revenue, customer concentration, management depth). Most factor-fix initiatives need 12-24 months to show up in financials and shift the multiple. If you’re less than 12 months from selling, focus on running a clean process rather than trying to materially change the business.

Should I do a formal valuation before going to market?

Usually no. The market sets the actual sale price through competitive bidding among buyers; a formal valuation done before sale won’t bind buyers and may even create anchoring problems if the formal number doesn’t match buyer offers. Most experienced M&A advisors recommend: free calculator (ctacquisitions.com/survey) + free advisor consultation for pre-sale estimating; formal valuation only if needed for legal/tax purposes.

What if my business is unusual and the calculator doesn’t fit?

Some businesses don’t fit standard frameworks: hybrid models, multiple revenue streams, recent acquisition or restructuring distorting financials, very small or very large for typical bands, or specialty industries without clean comps. For these cases, get a formal valuation from a BVR-certified appraiser ($3-15k) or have an extended consultation with an M&A advisor who specializes in your industry. The free calculator works for ~80% of lower-middle-market businesses; the other 20% need a tailored approach.

About the Author

Christoph Totter is the founder of CT Acquisitions, a buy-side deal origination firm headquartered in Sheridan, Wyoming. CT Acquisitions sources founder-led businesses for 75+ private equity firms, family offices, and search funds across the U.S. lower middle market ($1M–$25M EBITDA). Christoph writes about M&A from the perspective of someone on the phone with both sides of the deal table every week. Connect on LinkedIn · Get in touch