Price a Deal Before You Sell My Business Confidentially

Author : matthews everett | Published On : 21 Oct 2026

Price a deal before you sell my business confidentially, because every add-back a buyer rejects lowers the price by the multiple. On a hypothetical $220,000 of seller’s discretionary earnings at 2.7 times, a 20 percent haircut on $130,000 of add-backs costs $70,200. Know your number before buyers do.

Know the Metric Buyers Use

A BizBuySell guide for CPAs says seller’s discretionary earnings matters more than net income for a small business going to market. SDE recasts the financials to show the business’s ongoing earning potential to buyers, lenders and quality of earnings reviewers.

It also says the best time to prepare the SDE recast is before the business goes to market, with support for each add-back.

Know When EBITDA Takes Over

Iconic says that once a business passes roughly $2 million in value, buyers stop pricing it on SDE and switch to EBITDA, a different and usually higher basis. An eFinancialModels guide gives a similar line, using SDE for businesses under $2 million in earnings where the owner works in the business.

Check which basis your buyers will use, since the same company can look larger or smaller under each.

Price a Deal Before You Sell My Business Confidentially With Real Add-Backs

Take net income of $90,000, add an owner salary of $120,000 and add one-time costs of $10,000. SDE is $220,000, and add-backs are $130,000.

At 2.7 times, the average cash flow multiple a small-business marketplace reported for Q2 2026, that is $594,000. The multiple is an average, and yours depends on industry and risk.

Expect Buyers to Test Add-Backs

A guide on small business due diligence says buy-side quality of earnings providers commonly disallow 10 to 30 percent of the add-backs a seller proposes. Take the middle case, 20 percent of $130,000, which is $26,000.

SDE falls to $194,000, and at 2.7 times the price becomes $523,800. The haircut costs $70,200.

Document What You Add Back

BizBuySell’s guide lists a strong due diligence package as three years of tax returns, three years of profit and loss statements, year-to-date financials, the SDE recast with supporting schedules and a debt schedule.

Add-backs that rest on receipts and contracts survive. Add-backs that rest on memory do not.

Consider a Sell-Side Review

The due diligence guide says a quality of earnings engagement on a $5 million deal runs roughly $35,000 to $60,000, about 1 percent of the purchase price. A PraxisRock guide puts a quality of earnings report at $30,000 to $75,000.

For a small business that cost may not make sense. For a larger one, it can be cheaper than a $70,000 surprise.

Check the Market’s Averages

A marketplace report says 2,117 businesses changed hands in Q2 2026 at a median sale price of $349,250, with a median cash flow of $155,921 among those that sold. Medians and averages differ, so do not divide one by the other.

Use the numbers as context, and compare your multiple with sales in your own industry.

Watch Customer Concentration

The due diligence guide says any customer above 20 percent of revenue usually gets handled with an earnout or holdback instead of price alone. That affects how much cash you receive at closing.

If one customer is large, discuss the likely treatment with an advisor before buyers do.

Run the Numbers Before the Teaser

I’m not a financial advisor, so have an accountant check the recast. Then write down SDE, the add-backs, a range of multiples and the price each implies. Ask BizSellerAssist or another advisor to show how it prices before it markets, since an advisor told to sell my business confidentially should know the number first.

Frequently Asked Questions

Q: What is SDE?
A: Seller’s discretionary earnings recasts net income to show a business’s earning potential for an owner-operator, adding back items such as owner pay and one-time costs.

Q: When do buyers use EBITDA instead?
A: Iconic says above roughly $2 million in value.

Q: How many add-backs do buyers reject?
A: A due diligence guide says buy-side reviewers commonly disallow 10 to 30 percent.

Q: What does a quality of earnings review cost?
A: About $35,000 to $60,000 on a $5 million deal, per one guide, or $30,000 to $75,000 per another.