What Your Business Is Worth, and Why.
The formula fits on a napkin. The part that decides the number is the part most owners have never looked at straight.
Most owners already have a number in their head. It usually comes from one of two places: what the business turns over, or what they've poured into it over the years. Both feel fair. Neither is what a buyer pays.
A buyer isn't buying your turnover, and they're definitely not buying your effort. They're buying earnings they can count on without you in the building — and then paying some multiple of those earnings, depending on how sure they are the earnings will keep showing up after you hand over the keys. That's the whole thing. Everything else is detail underneath those two ideas.
“A buyer doesn't pay for what the business made last year. They pay for what they think it'll make for them — once you've walked out the door.”
Earnings, not turnover
The number it all hangs off isn't sales. It's earnings — and not the earnings on the tax return either. It's what the business genuinely makes once you take out the things that aren't really the business (the personal costs run through it) and put back in the things that are — a proper market wage for whoever does the job you're doing for free.
That matters more than it sounds. A business turning over two million on thin, owner-propped margin can be worth a fraction of one doing half that, run clean. Turnover tells a buyer how busy you are. Earnings tell them whether the busyness is worth anything.
Why two businesses with the same profit sell for different money
Here's where it gets interesting. Two businesses can make exactly the same profit and sell for completely different money. One changes hands for twice its earnings. The other for five times. Same profit. The difference is the multiple — and the multiple is really just a measure of how confident a buyer is that the profit keeps arriving once you're gone.
Your industry sets the broad range. A trades business with a yard full of gear and a pipeline that empties every few months tends to sit at the lower end — somewhere around two to four times earnings. A business with revenue that renews on its own, month after month, without anyone chasing it, can run a good deal higher. A medical practice with patients who keep coming back and practitioners who stay sits higher again. None of that is arbitrary — it's all the same question wearing different clothes: how reliable are these earnings, really?
“Your industry hands you a range. How the business is built decides where in that range you land — and that part is yours.”
So the range is the industry. Where you sit inside it is risk — and risk is the part you actually control. Which brings us to the thing that moves the number most.
The one thing that moves it most
Of everything that pushes the number up or down, owner-dependence does the most work — more than profit, even. If the business needs you in the room for the decisions, the key relationships, the quoting, the fix when it goes sideways — then what a buyer is really purchasing is a job with your name on it. And nobody pays a multiple for a job.
The more the business runs without you, the higher the ceiling on what it's worth. That's not a comment on how hard you work. Plenty of owners work themselves to the bone and have built a business that can't survive a fortnight without them. The hard work and the value are two different things.
What a buyer can actually take with them
A buyer is also paying for what actually transfers. Anything they can't verify, or can't take with them, gets discounted. Books that don't add up read as risk, and a buyer prices risk in — every number they can't check, they quietly assume the worst about. Clean, boring, verifiable books are worth real money. Not because they impress anyone — because they remove the doubt.
And this is where the lease tends to matter more than owners expect. If the lease is short, or it can't be handed to the new owner, or the premises are really your arrangement and not the business's — the number comes down. Not because the business got worse overnight, but because the buyer can't be sure the thing that makes it work comes with the sale. Same with a customer base that's all in your phone, or a key supplier who deals with you because they like you. If it walks out the door with you, the buyer won't pay for it.
“You can't grow your way to a number a buyer won't pay. The figure isn't a reflection of your effort — it's a reflection of how the business is built.”
Which is really the whole point
The value of your business isn't a figure a broker hands you. It's a mirror. The gap between the number in your head and the number a buyer would actually write down is the most honest read you'll ever get on how the business is built — it points straight at where the value is leaking out. Owner-dependence here. Concentration there. A lease nobody's looked at in years.
Most owners never look at that gap straight. Not because they can't — because the day fills up with everything else, and the number stays a feeling instead of a fact. But a feeling can't be fixed. A number can.
What's it actually worth
Find out what a buyer would really pay.
This is the napkin version. The real number — the one that holds up when a buyer's accountant goes through it line by line — needs your books on the table and an honest look at the things that move a multiple. That's a conversation, not a calculator.