What is your San Diego business actually worth?

The two numbers that matter: SDE and EBITDA

SDE — Seller's Discretionary Earnings

SDE is your net income plus owner compensation, owner benefits, interest, taxes, depreciation, amortization, and one-time non-recurring expenses. It represents the total economic benefit available to a single owner-operator. Most Main Street businesses (under roughly $1M in earnings) are valued on a multiple of SDE.

EBITDA — Earnings Before Interest, Taxes, Depreciation, Amortization

EBITDA is the larger-deal cousin. As businesses grow past the owner-operator threshold and management is professionalized, buyers price on EBITDA rather than SDE. The shift typically happens somewhere between $1M and $3M in earnings, depending on industry and management depth.

What multiple should you expect?

Multiples vary by industry, but the bigger driver within an industry is what buyers call "quality of earnings" — how predictable, transferable, and defensible the cash flow is. The quality factors that move multiples up or down:

• Customer concentration — one customer over 20% of revenue starts to hurt; over 30% and many buyers walk.
• Owner dependence — the more the business depends on you personally, the lower the multiple.
• Recurring vs. project revenue — recurring revenue commands a premium because it's predictable and transferable.
• Growth trajectory — growing businesses sell on forward-looking multiples; flat or declining ones sell on trailing multiples.
• Margin profile — above-industry-average margins usually signal a defensible position and command better pricing.
• Quality of books — clean accrual financials, separated personal expenses, and documented add-backs let buyers and lenders move quickly. Sloppy books cost real money.

Why "rules of thumb" mislead

Industry rules of thumb ("HVAC sells at 3x SDE") are useful as starting points and dangerous as endings. They average across dozens of underlying business profiles. The real question is where your business sits in the distribution — and whether you're at the top or bottom of the range for businesses of your size and industry. That's a conversation, not a formula.

What you can actually do about your valuation

Most owners think valuation is something that happens to them. It isn't. The same business, run for sale rather than for tax minimization, presented to buyers rather than just to the IRS, and operated to reduce owner dependence over a 12–24 month window, routinely commands a meaningfully higher multiple. That delta — between today's number and a prepared number — is the single biggest piece of leverage available to most sellers. See exit planning for what that work looks like.

How we approach valuation

The valuation work in our engagement isn't a one-page calculator output. It's a structured look at where your business sits relative to comparable transactions, what's holding the multiple down, and what changes — over what timeframe — would move it. The first conversation is free. Book a confidential call if you'd like to talk through your specific situation.