How to Value Your Small Business (And What to Know Before You Sell)

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.

Want help? Reach out.