What Is My Business Worth? How DFW Business Valuations Really Work
By Josh Campbell, Business Broker · First Choice Business Brokers Dallas Metro · Updated October 2026
SDE vs. EBITDA: which one applies to you?
- SDE (Seller's Discretionary Earnings): net profit + owner's salary and benefits + interest + depreciation/amortization + one-time or personal expenses. This is used for owner-operated businesses, generally those earning under roughly $1 to 2 million a year.
- EBITDA: earnings before interest, taxes, depreciation and amortization, after paying a market-rate manager. This is used for larger businesses with a management team, where buyers are often investors or private equity groups.
How SDE is calculated: a simple example
| Item | Amount |
|---|---|
| Net profit on tax return | $180,000 |
| Owner salary | $100,000 |
| Depreciation | $25,000 |
| Interest | $10,000 |
| One-time legal expense | $15,000 |
| SDE | $330,000 |
At a 3x multiple, this business would be worth about $990,000.
What pushes your multiple up
- A team that can run the business without you
- Recurring or contracted revenue
- No single customer making up more than 10 to 15% of sales
- Revenue and profit that have grown for 3 years
- Clean, well-documented financials
- Documented systems and processes
- A transferable lease and well-maintained equipment
What pulls your multiple down
- The owner is the key salesperson or technician
- Messy books or cash that isn't reported
- Revenue that is falling or swings a lot
- Heavy customer concentration
- Deferred maintenance or outdated equipment
- A short lease or one that can't be transferred
The three valuation approaches
- Market approach: compares your business with sales of similar businesses. This is the most common for Main Street deals.
- Income approach: discounts your expected future earnings back to today's value.
- Asset approach: based on what your assets are worth. This is used for businesses that are asset-heavy or losing money.
Why the SBA lender's view matters
Most buyers of businesses under $5 million use SBA 7(a) loans. The lender has to see that the business's cash flow can cover the loan payments with room to spare, and often orders its own valuation. If your price is above what the cash flow supports, the deal usually falls apart or needs seller financing to fill the gap.
Josh's take: Every owner I meet has two numbers: the one on the tax return and the one they tell their brother-in-law at Thanksgiving. Buyers pay for a third number, the SDE they can actually verify. The fastest way to raise your price usually isn't a better pitch; it's a cleaner add-back schedule. And if the bank won't lend against your number, the buyer won't pay it, no matter how much they love the business.
Industry notes
- Home services (HVAC, plumbing, electrical): high buyer demand; recurring service agreements raise the value.
- Trucking and logistics: valued heavily on the equipment and the contracts.
- Funeral homes: steady demand; value depends on the real estate and how many services are done each year.
- Professional services and agency books: valued on recurring revenue and how many clients stay.
Frequently asked questions
Is my business worth what I think it is?
Often it isn't, at least not at first. Owners tend to price on revenue or effort, while buyers price on cash flow they can verify, and on risk.
Can I increase my value before selling?
Yes. Spending 12 to 24 months cleaning up your books, reducing how much the business depends on you, and building recurring revenue can raise your multiple noticeably.
Do I need a formal appraisal?
For most sales, a broker's opinion of value is enough to price the business. Lenders may order a certified valuation during the deal.
Does real estate count in the multiple?
No. Real estate is usually valued separately and either sold or leased to the buyer.