The 3 Numbers That Determine What Your Service Business Is Actually Worth
Most service business owners think they know what their company is worth. They have a number in their head. Maybe it is based on what a friend sold for, or a formula they read somewhere, or just a feeling.
But buyers do not care about feelings. They care about three numbers.
Number one: EBITDA
Earnings before interest, taxes, depreciation, and amortization. This is the profit your business generates before accounting tricks. It is the single most important number in any deal.
Number two: the multiple
This is what a buyer multiplies your EBITDA by to get the purchase price. A business doing $1M in EBITDA at a 4x multiple sells for $4M. At 6x, it sells for $6M. Same business, different preparation.
Number three: owner dependency score
This is the one most people miss. If the business cannot run without you in the building, the multiple drops. If you have documented processes, a trained management team, and recurring revenue that does not depend on your personal relationships, the multiple goes up.
The gap between a 3x and a 7x multiple on a $2M EBITDA business is $8 million. That is not a rounding error. That is retirement money.
The owners who get premium multiples are the ones who spent 12 to 24 months before the sale making their business transferable. They documented every process. They built leadership depth. They created systems that run without them.
The ones who get lowball offers are the ones who listed the business on Monday and expected a premium by Friday.
If you have built a service business doing $5M or more in revenue, you owe it to yourself to know exactly where you stand on all three numbers.
To move the needle on these numbers, read how to increase your business valuation before selling, and understand how owner dependency discounts your exit price. For the recurring revenue angle, the 10% shift that adds $2M to your exit price shows the math on revenue mix changes.
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