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If you own a small service-based business — like a dog walking company, a handyman service, or a landscaping business — you might be thinking about what your business is worth. Whether you want to sell, bring on a partner, or simply gain a clearer understanding of your business’s value, determining the actual value of a small business can feel overwhelming.
We’ve created this guide based on our real-world experience of valuing multiple businesses to understand their worth.
Step 1: Understand How Your Business Works
Before we talk numbers, we need to talk about how your business runs:
- What services do you offer?
- Are your clients recurring or one-time?
- Who does the work — you, employees, or contractors?
- How involved are you in daily operations?
A business that depends entirely on you is harder to sell — or worth less — unless you’re planning to stay on or hire someone to replace you.
Step 2: Clean Up Your Financials
Before you can value your business, you need to separate your personal income from your business performance.
Here’s what to clean up:
- Separate your wages (what you earn doing the work) from your business profits
- Remove personal expenses from your books
- Track contractor costs clearly
- Make sure your financial statements (P&Ls, tax returns) match your bank statements
- Gather 2–3 years of records for review
Want a better valuation? Clean books = higher value.
Step 3: Understand Your Profit
Revenue is what your clients pay you. Profit is what’s left after paying your team, software, insurance, fuel, and everything else.
A quick breakdown:
- Revenue = Total sales
- COGS (Cost of Goods Sold) = Wages, materials, contractor fees
- Operating Expenses = Admin, software, rent, phones
- Net Profit = What’s left over
Owner wages need to be separated from profit — especially if you’re on the tools.
Step 4: Try a Few Valuation Methods
There’s no exact formula, but here are three common ways to estimate what your business might be worth:
1. Net Profit Method
Take the average net profit over the last 2–3 years, and multiply it by 3 to 4×. Example: $20,000 average net profit × 3 = $60,000 valuation
2. Revenue Multiple
Service businesses often sell for 0.3 to 0.5 times their annual revenue (higher if they’re well-run and profitable). Example: $180,000 revenue × 0.4 = $72,000 valuation
3. Seller’s Discretionary Earnings (SDE)
Some sellers include their own wages + business profit in the valuation. This only works if your labour can easily be replaced. If you still do the work, a buyer has to hire someone, which lowers the value.
Step 5: Ask: Are You Selling a Job or a Business?
This is the most important question. If the business only runs when you are working full-time in it, it’s not a business — it’s a job with clients.
To increase your value:
- Start documenting systems and SOPs
- Delegate more work
- Remove yourself from day-to-day jobs before you sell
Step 6: Look at the Bigger Picture (Opportunity + Risk)
Buyers (and you) should look beyond numbers:
- Can the business grow?
- Can prices be raised?
- Can systems reduce expenses?
- Is the team likely to stick around?
- Is the client base stable and loyal?
Even a small business with average numbers can have a huge upside if the systems, team, and client base are solid.
Step 7: When Not to Sell or Value
Sometimes it’s better to wait.
Don’t try to sell or value your business if:
- Your last year was a fluke (unusually good or bad)
- Your books are messy
- Most of your revenue comes directly from your labour
- You’re going through a major change (team turnover, new pricing, etc.)
Instead, take 6–12 months to clean things up and grow the value.
Step 8: Protect the Deal (If You’re Selling)
If you do sell, set it up properly:
- Non-compete clause (so you can’t start the same biz next door)
- List of what’s included (gear, website, phone number, software, logins)
- Clear transition period (training the new owner)
- Bonus structure for staff to stick around
- Agreements about client retention
- Disclosure of debts or tax issues
Don’t wing it. Structure it.
Step 9: Talk to Your Clients
This is optional — but smart.
If you plan to sell, be prepared to:
- Introduce the new owner
- Reassure that the service will stay the same
- Make it clear you trust them
- Share contact details for a smooth handoff.
This maintains trust and stability in business during the transition.
Final Tip: Get a Second Set of Eyes
If you’re not sure what your business is worth — or want to clean it up before you sell — that’s exactly what we help owners with. We’ll walk through your numbers, identify growth opportunities, and get your business ready to sell, grow, or run smoother.