--- title: "Business Valuation for Sale: Guide + Multiples [2026]" description: "How to value your business for sale: SDE vs EBITDA methods, industry multiples, and what buyers actually pay. Includes specific guides for dental, medical, law firms, and restaurants." canonical: "https://acquisitionstars.com/guides/business-valuation-for-sale" firm: "Acquisition Stars" practice: "M&A and securities law" office: "Novi, Michigan (serves clients nationwide)" contact: "consult@acquisitionstars.com | 248-266-2790" --- # What's Your Business Actually Worth? Seller's Guide The gap between what sellers think their business is worth and what buyers will pay can be millions of dollars. Here's how to close that gap. [Get Legal Guidance for Your Sale](https://acquisitionstars.com/consultation) [Quick Valuation Tool](https://acquisitionstars.com/tools/business-valuation) Dental Practices Medical/Healthcare Law Firms Restaurants ## Definition: Business Valuation for Sale The process of determining the fair market value of a business for purposes of sale, typically calculated as a multiple of Seller's Discretionary Earnings (SDE) for businesses under $5M or EBITDA for larger companies. Valuation considers financial performance, industry multiples, growth trends, customer concentration, and qualitative factors like owner dependence and competitive position. ### WE DO NOT PROVIDE VALUATIONS OR APPRAISALS **WE ARE A LAW FIRM, NOT APPRAISERS:** Acquisition Stars Law Firm PLLC is a law firm. We are not business appraisers or valuation professionals. We do not prepare, issue, or certify business valuations, appraisals, or opinions of value. Nothing on this page is a valuation of any business. **EDUCATIONAL CONTENT ONLY:** This page explains how valuation concepts commonly arise in M&A transactions. It is general information only. It is not valuation advice, financial advice, or legal advice for your situation. **ENGAGE A QUALIFIED APPRAISER:** For a formal valuation or appraisal, engage an independent credentialed valuation professional (for example, an ASA, CVA, or CPA/ABV). As your legal counsel, we can work alongside the appraiser you select and help you negotiate deal terms informed by their work. ## Fundamentals How Businesses Are Valued ### SDE Method Businesses under $5M **Seller's Discretionary Earnings** = Net Income + Owner's Salary + Owner Benefits + Non-Recurring Expenses + Interest + Depreciation **Formula:** Business Value = SDE × Industry Multiple Best for owner-operated businesses where the owner takes a salary and benefits. Multiple typically ranges from 1.5× to 4× SDE. ### EBITDA Method Businesses over $5M **EBITDA** = Earnings Before Interest, Taxes, Depreciation, and Amortization (assumes management is paid market rate) **Formula:** Business Value = EBITDA × Industry Multiple Used for larger businesses with professional management. Multiple typically ranges from 3× to 8× EBITDA depending on size and industry. ## Valuation Drivers What Affects Your Multiple | Factor | Increases Multiple | Decreases Multiple | | --- | --- | --- | | Revenue Trend | 3+ years of growth | Declining revenue | | Owner Dependence | Strong management team | Owner does everything | | Customer Concentration | No customer > 10% | Top customer > 25% | | Recurring Revenue | Subscriptions, contracts | Project-based, one-time | | Industry Outlook | Growing industry | Declining/disrupted | | Documentation | Clean books, SOPs | Messy financials | | Reason for Sale | Retirement, new venture | Health, burnout, distress | ## Industry Guides Valuation by Industry ### Dental Practice Valuation Typical Multiple: 60-85% of Annual Collections #### Key Valuation Factors - • **Collections vs. Production:** Buyers focus on actual collections, not gross production - • **Patient Base:** Active patients (seen in 18 months), average production per patient - • **Hygiene Revenue:** Practices with 30%+ hygiene revenue valued higher - • **Fee Schedule:** Below-UCR fees = room for growth = higher multiple #### Red Flags That Lower Value - • High Medicaid/HMO percentage (lower reimbursements) - • Outdated equipment requiring $100K+ investment - • Lease with <5 years remaining - • Owner produces 90%+ of revenue **Dental-Specific Formula:** Value = (Annual Collections × Multiple) + Equipment FMV + Inventory - Liabilities. Most practices sell for 60-85% of trailing 12-month collections, with specialty practices (oral surgery, ortho) commanding premiums. [Read Full Dental Valuation Guide](https://acquisitionstars.com/guides/dental-practice-valuation) ### Medical Practice Valuation Typical Multiple: 3-6× EBITDA or 40-70% Collections #### Key Valuation Factors - • **Payer Mix:** Commercial insurance vs. Medicare/Medicaid dramatically affects value - • **Ancillary Revenue:** Labs, imaging, infusion add premium value - • **Provider Coverage:** Multiple physicians vs. solo practice risk - • **Compliance History:** Clean billing history, no audits or investigations #### Red Flags That Lower Value - • Stark Law or Anti-Kickback compliance issues - • Heavy Medicare dependence (reimbursement risk) - • Aging physician workforce without succession plan - • Pending RAC audits or OIG investigations **Healthcare-Specific Consideration:** Corporate Practice of Medicine laws in many states restrict who can own medical practices. Buyers often use Management Services Organization (MSO) structures. Factor legal/structural complexity into timeline and costs. [Read Full Medical Valuation Guide](https://acquisitionstars.com/guides/medical-practice-valuation) ### Law Firm Valuation Typical Multiple: 0.5-1.5× Annual Revenue #### Key Valuation Factors - • **Practice Area:** PI, estate planning = higher; litigation, family = lower - • **Fee Structure:** Contingency portfolios valued differently than hourly - • **Client Retention:** Institutional clients vs. one-time matters - • **Work in Progress:** WIP and accounts receivable add to value #### Red Flags That Lower Value - • Malpractice claims or bar complaints - • Key-person risk (clients follow the attorney) - • Trust account irregularities - • High associate turnover **Law Firm-Specific Challenge:** Ethical rules in most states prohibit non-lawyers from owning law firms or sharing fees. "Sales" are typically structured as asset purchases (files, goodwill) with consulting agreements for transition, not equity sales. [Read Full Law Firm Valuation Guide](https://acquisitionstars.com/guides/law-firm-valuation) ### Restaurant Valuation Typical Multiple: 1.5-3× SDE or 30-50% Annual Sales #### Key Valuation Factors - • **Concept Type:** QSR/fast-casual > fine dining for multiples - • **Lease Terms:** Below-market rent dramatically increases value - • **Liquor License:** Transferable license adds significant value - • **Systems:** POS data, recipes documented, trained staff #### Red Flags That Lower Value - • Lease expires <3 years (or landlord won't assign) - • Health department violations or low ratings - • High staff turnover, no management depth - • Cash-heavy operations with unverifiable revenue **Restaurant-Specific Reality:** Most restaurants sell for equipment value plus a small premium for goodwill. Only consistently profitable restaurants with transferable systems command meaningful multiples. Franchise restaurants follow different (franchisor-controlled) valuation rules. [Read Full Restaurant Valuation Guide](https://acquisitionstars.com/guides/restaurant-valuation) ## Avoid These Valuation Mistakes Sellers Make 1 ### Using revenue instead of earnings Buyers pay for profit, not revenue. A $2M revenue business with $100K profit is worth less than a $1M business with $300K profit. 2 ### Overvaluing "sweat equity" The 20 years you put into building the business doesn't add to value. Buyers pay for future cash flows, not your past sacrifices. 3 ### Ignoring add-backs (or making up fake ones) Legitimate add-backs (owner's excess salary, personal expenses) increase SDE. But buyers and their CPAs will scrutinize every add-back-fake ones kill deals. 4 ### Comparing to outlier sales "I heard a competitor sold for 6× revenue." Maybe-but that deal likely had strategic value, scale, or circumstances that don't apply to your business. ## Get Legal Guidance for Your Business Sale We are M&A attorneys, not appraisers. We do not provide valuations. We help you structure, negotiate, and close your transaction, and we work alongside the independent appraiser you engage. [Schedule a Legal Consultation](https://acquisitionstars.com/consultation) [Call: (248) 266-2790](tel:+1-248-266-2790) Acquisition Stars • acquisitionstars.com • alex@acquisitionstars.com ### Related Seller Resources #### Is Your Business Sellable? 7 factors that determine if buyers will be interested. #### LOI Templates What to expect when buyers make offers. #### Due Diligence Tracker Prepare your documents before going to market. ## Legal counsel for this topic Acquisition Stars handles M&A transactions nationwide and works with independent securities counsel on securities matters. Alex Lubyansky leads every engagement. [Closest fit for this topic Business sale attorney Legal representation for business owners selling their company.](https://acquisitionstars.com/business-sale-attorney) [Sell-side M&A counsel Sell-side representation for owners negotiating a business sale.](https://acquisitionstars.com/services/sell-side-ma) [ESOP and exit planning counsel Legal counsel for owners planning an ESOP sale or an exit.](https://acquisitionstars.com/services/exit-planning) [Michigan service areas Acquisition Stars serves clients across Michigan and nationwide.](https://acquisitionstars.com/locations) [Request Engagement Assessment](https://acquisitionstars.com/consultation) --- Source: https://acquisitionstars.com/guides/business-valuation-for-sale Markdown version generated for machine readers. Canonical HTML at the source URL.