Business Valuation Guide

What Is Your Business Actually Worth?

One of the most common misconceptions business owners hold is that their company is worth what they've put into it — in time, money, or emotion. In reality, market value is determined by what a qualified buyer is willing to pay based on financial performance, risk, and growth potential.

A professional valuation gives you a realistic, defensible number to take to market. It also helps you identify gaps to close before listing — potentially adding significant value before the first buyer ever walks through the door.

At Marathon Capital Advisors, we perform complimentary market valuations for all qualified sellers as part of our initial consultation. Our assessments draw on current transaction data, industry multiples, and a thorough review of your financials.

How Businesses Are Valued

Seller's Discretionary Earnings (SDE)

The most common method for main street businesses under $5M. SDE represents the true economic benefit to a full-time owner-operator — net income plus the owner's salary, perks, one-time expenses, and non-cash charges.

EBITDA Multiple

Used for larger businesses (typically $1M+ EBITDA), this method applies an industry-specific multiple to Earnings Before Interest, Taxes, Depreciation, and Amortization. It normalizes for capital structure and accounting differences.

Asset-Based Valuation

Best suited for asset-heavy or distressed businesses, this method values the company based on net tangible assets — equipment, inventory, real estate — minus liabilities. Often used as a valuation floor.

Discounted Cash Flow (DCF)

Projects future cash flows and discounts them to present value using a risk-adjusted rate. Most applicable to growth-stage businesses with predictable, scalable revenue. Requires reliable financial projections.

Market Comparables

Benchmarks your business against recent sales of comparable companies in the same industry, revenue range, and region. Marathon Capital Advisors has access to proprietary transaction databases covering thousands of closed deals.

Revenue Multiple

Common in SaaS, subscription-based, or high-growth businesses where profitability is secondary to recurring revenue. Multiples typically range from 0.5× to 3× annual revenue depending on churn, margins, and growth rate.

What Moves the Number

Key Value Drivers

These factors can significantly raise or lower the multiple a buyer is willing to pay:

Consistent Revenue Growth — Three or more years of upward trending revenue signals a healthy, scalable business.
Owner Independence — Businesses that run well without the owner command premium multiples. Strong management teams matter.
Recurring & Contracted Revenue — Subscriptions, service contracts, and retainer clients reduce buyer risk and increase value.
Customer Diversification — If any single customer accounts for more than 20% of revenue, it's a red flag for buyers.
Clean, Well-Organized Financials — Professionally prepared, multi-year financials dramatically reduce due diligence friction.
Documented Systems & Processes — Standard operating procedures that don't live in the owner's head are a major plus.
Strong Online Reputation — Reviews, ratings, and brand presence add intangible value that buyers factor in.
Defensible Market Position — Long-term contracts, proprietary products, certifications, or geographic dominance add durability.

Common Mistakes That Reduce Value

Many business owners unknowingly reduce their sale price by years of habits that make financial sense at tax time but hurt at sale time. Common issues include:

Mixing personal and business expenses aggressively
No separation between owner compensation and distributions
Relying on informal or cash-based sales with no paper trail
Deferred maintenance or undisclosed liabilities
Undocumented verbal agreements with key clients or staff

Get a Complimentary Valuation

Our brokers will review your financials and provide a realistic market value estimate — at no cost and with full confidentiality.

Request Your Valuation