What's your business worth - really?
Take the guesswork out of setting a sale price by calculating your business's 'Ebitda'.
By Justin Martin, FSB Magazine

(FSB Magazine) -- If you want to find out what your business will fetch, you'll have to tackle something called Ebitda. This tongue-twisting acronym stands for earnings before interest, taxes, depreciation, and amortization and is a metric that allows you (and a potential buyer) to value your company based on its cash flow. It also makes it easier to compare your business with others in your industry that might be subject to different tax and depreciation rates and debt levels.

First, calculate your Ebitda. This involves adding back into your net profit items such as interest expenses and taxes. Then find out what multiples of Ebitda other small companies in your industry were sold for (see below). This information is often available through trade associations as well as Pratt's Stats, a guide that provides details on small-company sales.

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Remember, these multiples are only benchmarks. Says Dolliver Frederick, CEO of Frederick Capital a business broker in Newport Beach, Calif.: "Your company is unique. Regardless of the industry averages, its value will depend on factors such as the talent of your management team and whether you are an innovator."

Multiply these numbers times your Ebitda or cash flow to get a ballpark estimate of your business's worth:

  • Manufacturing: 5.5 to 8.5
  • High tech: 6 to 12
  • Health-care services: 5 to 9
  • Retail: 4.5 to 7.5
  • Public relations, advertising, media: 3 to 6.5
  • Restaurants: 4 to 8

Next: The time to sell is... now!

Fresh ways to find buyers

What's your business worth? Is this a good time to sell? What's the best way to get a good price for your company? Tell us what you think. Top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.