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

The short version

• Your service business is worth its earnings times a multiple, and that multiple runs from about 1.65x to 3.5x depending on one thing: how much it depends on you.
• On a $300,000-SDE business, that range is a $555,000 spread between the same business owner-dependent and owner-light.
• 86% of owners have no real valuation, so the first number most hear is the one a broker hands them the year they sell.
• Below: how the number is built, why the broker's version is not it, and how to get a real one free in four minutes.

The question "what is my business worth" has a real answer, and it is not the one most owners get. A service business is worth its seller's discretionary earnings times a multiple, and that multiple is mostly about how much the business runs through you.

Most owners never see that math before they sell. 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 the year they list.

That is the most expensive number you will ever take at face value. By the time a broker prices your business, the years you needed to move the number are already behind you.

This article shows you how the number is actually built and how to get a real one for yourself first, before anyone with a reason to shade it has framed the conversation.

Service business valuation: what your business is actually worth

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.

On $300,000 of SDE, that is a sale price somewhere between $495,000 and $1,050,000.

So the number is two things: an earnings figure and a multiple. The earnings figure is largely settled by your books; the multiple is where the real money moves.

That earnings figure has a name, and it matters which one you use. Most service businesses are priced on SDE rather than EBITDA, and the difference between SDE and EBITDA decides what a multiple even attaches to.

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

The multiple is the part you control. The full mechanics of how a small business gets valued come down to which side of that 1.65x-to-3.5x range a buyer puts you on.

That placement is not random and it is not luck. It is a read on one question: how much of last year's profit is transferable, and how much walks out the door with you?

Why the broker's number is not the number to plan around

Start with the incentive, not the complaint. A broker engages to close a sale, not to hand you an accurate figure three years early when you still have time to move it.

That is not dishonesty; it is the job. A broker prices your business to list it, in the window where the number is 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, not a map of where you could have gone. It tells you the multiple you earned, not the one you could have built.

Read the broker's number for what it is: a figure set by someone paid to win the listing, not to be right. A flattering estimate gets the engagement signed, and the market corrects it later when a buyer's lender prices the same earnings far more skeptically.

There is a second problem with waiting for it. The broker's number arrives without a breakdown of what is discounting it, so you cannot act on it even if you wanted to.

A real number does the opposite. It shows you the earnings, the multiple, and the specific gap between the multiple you have and the one your earnings could command.

There is also the appraisal route, and for most owners it is the wrong first step. A formal valuation from a CPA runs $2,000 to $8,000, lands as a static document, and tells you nothing about what to fix.

You pay thousands for a snapshot, and a year later it is stale. What a working owner needs first is not a document but a number they can run again as the business changes.

That gap is the whole game in preparing your business to sell. You want it on the table years early, while there is still runway to close it.

How to get a real number in four minutes, before you call anyone

You do not 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 is what the free Keystone diagnostic does. It asks 18 questions about how your business actually operates and returns a number calibrated against real closed transactions, not a generic calculator.

Here is what it gives you in four minutes:

• 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.
• An estimated sale price range. Your earnings translated into a multiple and a dollar figure, the way a buyer would actually see it.
• What is discounting it. The specific factors pulling your multiple toward 1.65x instead of 3.5x, ranked.

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

The estimate is calibrated against 10 years of BizBuySell Insight Reports and 1.6M+ SBA 7(a) loan records. That is the same closed-transaction data a buyer's lender leans on, applied to your business before a broker applies it for you.

The point is sequence. You get the real number, then you decide whether to sell, fix, or wait, instead of letting a broker's listing number decide for you.

What moves your number once you have it

Once you have the number, the next question is what moves it, and the answer is almost never revenue. The variable that separates a 1.65x business from a 3.5x one is owner-dependence, the discount a buyer applies when the business needs you to function.

On a $300,000-SDE business, closing that gap is worth $555,000. That is the difference between selling at $495,000 and selling at $1,050,000 on identical earnings.

The number 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 is not 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, not a vague cleanup, and each one shows up in the number the next time you run it. A business that has run without its owner for two clean years is priced near 3.5x; one that only promises it will is priced near 1.65x.

Notice what is not on that list. Growing revenue is not on it, because a bigger owner-dependent business is still an owner-dependent business at 1.65x.

A bigger 1.65x business can even be the worse trade. You add the hours and the risk of more revenue while the multiple stays pinned, when the same effort spent on transferability lifts the multiple across all of your earnings at once.

The order matters as much as the work. You move the Business Independence Score first because nothing downstream is real until the business can decide without you.

That is why you want the number years early. The gap is closeable, but only with the runway to install the changes and prove they hold.

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 an estimated sale price 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 $300,000-SDE business is a $555,000 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.

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You cannot plan around a number you have not seen.

The free Keystone diagnostic gives you three scores and an estimated sale price, calibrated against 10 years of BizBuySell Insight Reports and 1.6M+ SBA 7(a) loan records. You see your real number and exactly what is discounting it, before a broker prices it for you.

Get your three scores and an estimated sale price, free, at app.trykeystone.io.

The number shows the gap. The Systems Sprint closes it.

Keystone Core ($129/mo, $1,290/yr) tracks the number month by month as you move it, and the Systems Sprint is a 30-day engagement that installs the operating layer your valuation is missing. Sprint pricing is $1,500 Beta, $1,900 Standard, and $4,500+ for the Portfolio Edition.