What's Your Trades Business Actually Worth? A Plain-English Guide

Ask around what your business is worth and you’ll get three answers: a broker who wants your listing, a buddy who sold his shop a few years back, and a number in your own head you’ve never tested. Usually they’re all wrong.

Here’s the actual math. No MBA required.

The whole thing is one line

Almost every sale of a trades business comes down to this:

Value = real profit × a multiple.

That’s it. Two jobs: figure out your real profit, and figure out the multiple a buyer pays for it. Everything else — your trucks, your reviews, how much the place leans on you — is just an argument about whether the multiple should be higher or lower.

Step 1: Your real profit (not what’s on the tax return)

The profit on your tax return is built to keep taxes low. Buyers don’t use it. They rebuild it to see what the business really earns. For most owner-run shops they use SDE — Seller’s Discretionary Earnings. In plain terms:

SDE = net profit + your salary + the personal stuff you run through the business + any one-time costs.

So you add back:

• Your pay. A buyer is buying the business, not your paycheck — so your salary goes back in.
• Personal perks. The truck that’s really personal, your phone, the trip that was mostly vacation, a family member on payroll who doesn’t put in the hours.
• One-time costs. A lawsuit, a flood, a software switch you’ll never pay for again.

Add those to your net profit and you’ve got SDE — the real money the business throws off for one owner. (Bigger businesses, say over about a million in earnings, get valued on EBITDA instead, which is the same idea but with a manager’s salary subtracted back out because a big buyer hires someone to run it.)

The single most common way owners shortchange themselves: they hand over the tax-return number and never add back the pay and perks. Don’t.

Step 2: The multiple

Now you multiply. For most owner-operated trades businesses, the multiple runs about 2 to 3.5 times SDE. Where you land in that range depends on how risky your profit looks to a buyer.

A quick gut-check:

If your business…	Multiple leans…
Has lots of recurring/service-agreement work	Up
Runs fine when you’re on vacation	Up
Has clean, current books	Up
Depends on you for every bid and big job	Down
Has one customer that’s a huge share of revenue	Down
Has messy or behind books	Down

Bigger businesses earn higher multiples too — that’s the “size premium,” and it’s why the groups buying up the trades will pay more for one $4M business than for four $1M ones.

A quick example

Say your tax return shows $150K in profit. Rebuild it:

• Net profit: $150,000
• Add back your pay: +$110,000
• Add back personal truck, phone, travel: +$20,000
• Add back a one-time legal bill: +$10,000
• SDE = $290,000

Clean books, a good chunk of recurring work, runs without you most days → call it 3×:

$290,000 × 3 = ~$870,000

Now the messy version — books behind, every job runs through you. Buyer drops to 2× and won’t believe half your add-backs, so they use $250K:

$250,000 × 2 = ~$500,000

Same trucks. Same revenue. A $370K difference — decided by how clean your numbers are and whether the business needs you. That gap is the whole reason to know your number early.

What this means for you

Two takeaways:

1. Revenue isn’t the scoreboard. Profit and risk are. Chasing bigger top-line numbers while margins stay thin and the business leans entirely on you can actually make it harder to sell for a good price.
2. You can move your number on purpose — and most of the levers (recurring work, getting yourself out of the middle, clean books) make the business better to own right now, not just easier to sell later.

That’s the double win, and it’s what we mean by “make it worth top dollar.” More on the build-it-on-purpose side in build it so it could sell tomorrow.

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Want a real number for your business — with every assumption shown, not a broker’s guess? Get on the waitlist. Built for owners, not brokers.