How much is my business worth? How buyers actually decide

How much is my business worth? For a profitable Canadian company, a buyer usually works it out as a multiple of normalized EBITDA, the profit the business really earns once one-off and owner-specific costs are adjusted, then subtracts debt and adds back extra cash. The profit sets the base. The multiple reflects how much risk the buyer sees, and it decides most of the result, which is why two companies with the same profit can sell for very different prices.

Owners find this hard to judge from the inside. In a CFIB survey of owners planning their exit, 43% named valuing the business as one of the biggest obstacles. Here is how a buyer actually gets to a number, step by step, with the public data on multiples and its honest limits.

How much is my business worth to sell?

Start with a distinction that saves a lot of disappointment. A valuation gives you fair market value: the price a willing buyer and a willing seller would agree on, both informed and neither forced. A sale gives you a price: what one particular buyer pays, on particular terms, on a particular day. The two can differ in either direction. A competitor that can cut shared costs may pay more than fair market value. A buyer who finds problems in diligence will pay less.

Professionals use three broad approaches. For a profitable company, buyers lean hardest on the second and third.

• The asset approach: what the assets are worth, less the liabilities. It sets a floor, and it is the main method when a business earns little.
• The income approach: what the future profits are worth today, either by capitalizing a sustainable level of earnings or by discounting forecast cash flows.
• The market approach: what similar businesses have sold for, usually expressed as a multiple of earnings.

For owner-managed companies with $1 million to $10 million of EBITDA, most conversations come down to one formula.

The formula: normalized EBITDA times a multiple

EBITDA is earnings before interest, taxes, depreciation and amortization. It is a rough measure of the cash the operations produce, before decisions about financing and tax. A buyer multiplies it by a number to get enterprise value, the value of the business as a whole. Then they move from enterprise value to the value of your shares: they take off debt and add back cash the business does not need to operate. The price is also usually adjusted at closing for working capital, so the business arrives with a normal level of receivables, inventory and payables.

In this illustration, a business that reports $1.7 million of EBITDA is really earning $2.0 million once its books are normalized. At five times, the headline price is $10 million, so $8 million of it comes from the multiple. After $1.5 million of debt is repaid and $0.5 million of extra cash is counted, the shares are worth $9.0 million. Tax comes after that, and depends a great deal on how the sale is structured. The numbers are round on purpose. Your multiple may be higher or lower, and the rest of this article is about why.

What is normalized EBITDA?

Owner-managed businesses rarely report the profit a buyer will own. The books are kept to satisfy the CRA and the bank, and they reflect choices that made sense for you. Normalizing means adjusting the figures to show what the business would earn under an owner at arm’s length. The common adjustments, often called add-backs:

• The owner’s pay, set to what it would cost to hire someone to do your job. If you pay yourself less than that, profit goes down, not up.
• Personal and family expenses that run through the company.
• One-time costs, such as a lawsuit, a move or an unusual repair.
• Rent paid to a property you own, adjusted to a market rate.
• Family members on the payroll who would not be replaced.

Every add-back has to be proven, with records. Buyers and their accountants test each one, and every rejected dollar comes off the price times the multiple. At five times, a $100,000 add-back that does not hold up takes $500,000 off the price.

This is why clean, documented numbers are worth so much, and why weak ones break deals. In Axial’s study of signed letters of intent that fell apart in 2025, 21.3% broke on quality of earnings reviews that did not support the seller’s figures.

How many times EBITDA is a business worth?

This is the question everyone wants a single answer to, and there isn’t one. Canada has no public database of private company sale prices. The best public figures are American, and they come from two very different worlds.

• Larger private equity deals. GF Data, which tracks US private equity acquisitions worth $10 million to $500 million, reported an average of 7.0 times adjusted EBITDA in the second quarter of 2026, down from 7.3 times in the first, according to Mercer Capital.
• Smaller businesses. In BizBuySell’s third-quarter 2026 report on US small business sales, businesses that sold for more than $1 million went for an average of 3.73 times cash flow, against 2.30 times for smaller ones. Cash flow there includes the owner’s own salary, so it is not the same measure as EBITDA.

A company with $1 million to $10 million of EBITDA sits between those two worlds. Treat any figure you read, including these, as a range to understand rather than a price to expect. The spread within one industry is usually wider than the spread between industries, because the multiple is mostly a price on risk.

What is a good EBITDA multiple?

A good multiple is one a buyer can defend to their lender and their investment committee. They build it from what they see, and these are the things that move it most.

• Size. Larger, more established companies attract more buyers and cheaper financing. The BizBuySell figures show the same pattern at the small end.
• Owner dependence. If customers, pricing and the hard calls run through you, the buyer is buying a job. It is the largest single discount I see.
• Customer concentration. One customer with a large share of revenue is one phone call away from a much smaller business.
• The quality of the numbers. Monthly accounts, reviewed or audited statements and add-backs that hold up shorten diligence and protect the price.
• Recurring revenue and growth. Contracts, repeat customers and a steady upward trend make the future easier to believe.
• Capital needs. Machines near the end of their life are a cost the buyer will deduct.
• Competition for the deal. One buyer sets the price. Several buyers test it.

We walk through how a buyer sees each of these in what buyers look for when buying a business.

Your industry sets the range. How the business runs without you sets where you land in it.

How much is my business worth based on revenue?

Revenue multiples are quoted often, and many online calculators ask for little else. For a profitable owner-managed company, they mislead. Two businesses with $10 million of sales can earn $300,000 or $2 million, and no buyer pays the same for both. Revenue multiples make some sense for fast-growing companies that are not yet profitable, and in a few industries where margins are very uniform. Everywhere else, buyers price the profit.

The same goes for the common searches about what a business with $1 million or $5 million in sales is worth. Without the profit, the question has no answer.

Is my business worth anything if it barely makes a profit?

Usually, yes, but the answer moves from the income approach to the asset approach. A business with little profit is worth roughly what its equipment, inventory, receivables and property would fetch, less what it owes. A buyer may pay a little more for a customer list, a licence or a location.

Be honest about the reverse case too. If the business shows a modest profit mainly because you work long hours for little pay, normalizing your salary can show that it earns less than it seems. It is better to know that before a buyer does.

Why owners and buyers see different numbers

Owners usually arrive with a number in mind. It is often built from what they need to retire, what they have put in over the years, or what a friend’s company sold for. A buyer builds the number from the next five years of profit, and the risk that it won’t arrive without you.

The gap shows up in the data. Statistics Canada found that only 34.6% of owners planning to sell within two years expect to receive a fair market price. Some of that is pessimism. Much of it, I suspect, is owners sensing the distance between what the business means to them and how it will look to a stranger reading the numbers cold.

The danger is finding out late. A first offer is usually based on what you share before diligence. When diligence finds owner dependence, a concentrated customer list or add-backs that don’t hold up, the price tends to move in one direction, at a point when you are tired, committed and short of alternatives. We cover that moment in what to do with an unsolicited offer.

Do I need a professional business valuation?

It depends on why you are asking.

• For a rough sense of range, an online calculator is fine, as long as you know it takes a few inputs, applies an average multiple, and knows nothing about your customers, your team or your books.
• For tax, legal or family purposes, such as an estate freeze, a shareholder buyout, a dispute or a transfer to your children, get a formal valuation from a Chartered Business Valuator. The CBV Institute keeps a directory of its members.
• For a sale, a valuation report is an opinion of fair market value, not an offer. What helps more is seeing the business the way a buyer will: normalized earnings you can defend, an honest list of the risks they will price, and a realistic range.

Whichever you choose, start well before you need the number. A valuation done in a rush, for a sale already under way, mostly tells you what you can no longer change.

How to raise what your business is worth in 1 to 2 years

The two levers are the two parts of the formula: the profit and the multiple. Profit can be grown, but the multiple is where preparation pays most, because every dollar of profit is multiplied by it. Most of the work fits in 1 to 2 years.

• Normalize and document your numbers now, with monthly reporting and add-backs a buyer’s accountant will accept.
• Hand customer relationships, pricing and hiring to managers, and let them build a record of deciding without you.
• Widen the customer base, so no single account can sink the year.
• Write down the knowledge that lives in people’s heads: quoting, set-ups, supplier terms.
• Plan capital spending, so a buyer has no backlog to deduct.
• Tidy the balance sheet. Moving out cash and investments the business does not need can also protect your access to the lifetime capital gains exemption.

Our method sets out how we approach this work with owners.

The price is not what you keep

The value of your shares is not the cheque you deposit. How the deal is structured decides how much of it you keep, and when you receive it.

• Shares or assets. A share sale may let you use the lifetime capital gains exemption, $1,275,000 per person in 2026, and avoids tax at two levels. See share sale vs asset sale in Canada.
• Tax. Only half of a capital gain is taxed. We work through a $10 million example in capital gains when selling a business in Canada.
• Deferred payments. Part of a price paid later, through an earn-out or vendor financing, is worth less than cash at closing, and some of it may never arrive.
• Shares in the buyer. A stake you roll into the buyer’s company can pay less than its percentage suggests.

Compare offers on what you keep after tax, and on when you receive it. Confirm the tax and legal points with your accountant and your lawyer.

If you would like a realistic view of what your business is worth, and of what would raise it, a short, private conversation is a good place to start.