Valuation
How to value a business in New York
Most valuation advice for small businesses is a table of industry multiples. Those tables are the most common reason buyers anchor on a wrong number — and several are built on an error worth two to three times. Here is the band, what moves a business within it, and how to check any multiple you are handed.
On this page6 sections
The method, in four steps
Valuing a small business is not mysterious. It is four steps, and almost all the difficulty is in the first one.
- Reconstruct the earnings. Take the tax return, not the listing. Add back what genuinely will not recur for a new owner; refuse the add-backs that are really operating costs wearing a disguise. This is SDE or EBITDA depending on whether the business runs on an owner or a manager, and you can do it in the SDE calculator.
- Choose the multiple. Start from the band, then move up or down for the specific factors below.
- Check it against the assets. Subtract the fair market value of equipment and inventory from the price. What remains is goodwill — the going concern. A price far below tangible value should worry you as much as one far above it.
- Test it against the debt. A defensible value the cash flow cannot service is not a price you can pay. Run it through the affordability calculator.
Step one carries the weight. A 20% error in reconstructed earnings moves the price by 20% at any multiple, and errors in earnings are far more common than errors in multiple selection.
The band, and where it comes from
Across the closed transactions reported to its platform in Q2 2026, BizBuySell reported an average cash-flow multiple of 2.7×, a median sale price of $349,250, median cash flow of $155,921 and median revenue of $692,087, across 2,117 reported sales.[1]
Read those numbers carefully, because they are more limited than they look:
- National, not New York. Nothing in that figure is state-specific.
- A platform sample, not a census. It covers transactions reported to one marketplace. Most small-business sales are never reported to anyone.
- An average across incomparable things. A dental practice and a pizzeria are both in it.
So: a useful orientation point, and not a benchmark for any individual business. Practically, most owner-operated small businesses transact somewhere between 2× and 4× SDE. The whole question is where inside that band a specific business sits — and that is not answered by its industry.
What actually moves the multiple
Buyers look for the answer in the sector. It is mostly in the transferability of the earnings: how much of the cash flow survives the owner leaving, and how confidently a buyer can prove it will.
| Factor | Pushes toward the bottom | Pushes toward the top |
|---|---|---|
| Owner dependence | The owner is the business — relationships, quoting, technical skill | A manager runs it; the owner could miss a month |
| Customer concentration | One customer is a large share of revenue | Hundreds of customers, none critical |
| Revenue quality | Project-based, re-won every time | Contracted or genuinely recurring |
| Trend | Declining, or flat with declining margin | Growing, with the margin holding |
| Books | Reconstruction needed; cash handling; add-backs that cannot be evidenced | Clean, reconciled, survives a QoE without surprises |
| Staff | Thin, or key people likely to leave with the owner | Tenured, and staying |
| Premises | Short lease, no options, landlord consent uncertain | Long lease with options, or the property is included |
| Licences | Attached to the owner, or slow to transfer — a liquor licence, say | Transfer cleanly, or none required |
| Capex | Ageing equipment with replacement due | Recently reinvested; nothing pressing |
| Financeability | Will not clear a lender's coverage test at the asking price | Clears comfortably, widening the buyer pool |
The last row is quietly the most powerful. A business a lender will finance has many possible buyers; one that will not is restricted to cash buyers, and prices accordingly. That is why the coverage test is a valuation input and not just a financing formality.
Why we will not publish an industry multiple table
You will find plenty of them. Several are built on an error large enough to change a price by two or three times, and it is worth knowing how to spot it, because these tables are the single most common source of a buyer anchoring on the wrong number.
The error is mixing SDE multiples with EBITDA multiples in one list. SDE adds the owner's whole compensation back; EBITDA does not. For a business where the owner takes $150,000, those two earnings figures differ by $150,000 — so their multiples are not comparable, and a table that presents both under one heading is not a table of anything.
In practice this produces figures like “6× to 12×” for a service sector, which is an EBITDA range for manager-run companies far larger than the business a first-time buyer is looking at. Applied to that buyer's SDE it would roughly double a defensible price.
How to check any multiple you are given, in three questions:
- Multiple of what? If the answer is not immediately “SDE” or “EBITDA”, the number is unusable.
- At what size? Multiples rise with earnings. A figure drawn from businesses ten times larger does not describe yours.
- Asking or achieved? Asking-price multiples run above achieved ones, and listings that never sell stay in the asking pool indefinitely.
A source that cannot answer all three is describing someone else's business. The asking price sanity check works the other way round: it computes the multiple your figures imply, which is a number you can actually defend.
The other methods, and when they apply
The SBA lists several valuation approaches — capitalized earnings, excess earnings, cash flow, tangible assets and specific intangible assets.[2] For the businesses this site is written for, most reduce to three:
| Method | When it governs | Watch for |
|---|---|---|
| SDE multiple | Owner-operated businesses, conventionally under about $1M of earnings | Add-backs that will not survive a lender's reconstruction |
| EBITDA multiple | Manager-run businesses above roughly $1M | Whether the management really is in place, or is the seller in a different chair |
| Asset-based | Asset-heavy or marginally profitable businesses, and as a floor on any deal | Fair market value, not book value — and not the seller's replacement-cost estimate |
Discounted cash flow is the textbook method and rarely the practical one at this size: it demands multi-year projections for a business whose performance depends heavily on an owner who is leaving. Where a broker presents a DCF on a $400,000 business, read the assumptions before the conclusion.
Run the asset-based figure as a floor even when you are pricing on earnings. If the earnings-based number lands below the fair market value of the equipment and inventory, you have either mis-stated the earnings or found a business worth more dismantled than running — and both are worth knowing.
What New York changes
Not the arithmetic. The earnings the arithmetic runs on:
- Occupancy. The same business carries very different rent across the state, and in Manhattan below 96th Street the Commercial Rent Tax is a real line. Occupancy comes out before SDE.
- Labour. Average pay varies widely by county — see the county data. A payroll assumption borrowed from a national comparison will be wrong in both directions depending where you are.
- Licences. A permission that does not transfer, or transfers slowly, reduces what a buyer will pay for the business attached to it.
- Structure. Asset or equity changes the tax outcome for both sides, which is why the same business supports different prices under different structures.
Value the business you are actually buying, in the place you are actually buying it. A multiple is the last step and the least of the work.
Frequently asked questions
What multiple should I pay for a small business?
For an owner-operated business, most transactions fall in a band of roughly two to four times SDE, and BizBuySell reported an average of 2.7× across the closed transactions reported to its platform in Q2 2026. That is a national platform average across businesses of wildly different quality, so treat it as an orientation point rather than a target. Where your specific business sits inside the band is decided by how transferable the earnings are, and that is a diligence question rather than a lookup.
Why will you not give me a multiple for my industry?
Because the per-industry tables circulating online are less reliable than they look, and several make an error worth two to three times. They mix SDE multiples for owner-operated businesses with EBITDA multiples for larger manager-run ones, so a figure like “6×” may be an EBITDA multiple for a business ten times the size of yours. Applying it to your SDE would roughly double a defensible price. The band and the factors on this page will get you closer to a real number than a point value from a table that does not describe your business.
Should I value a business on a multiple of revenue?
Rarely, and never as the primary method for a small business. Revenue multiples ignore margin entirely, so two businesses with identical revenue and completely different profitability price the same. They appear most often when a broker wants a bigger number than the earnings support. Where a revenue rule of thumb genuinely governs a sector, treat it as a cross-check on an earnings-based figure, not a replacement.
Does the asking price tell me anything?
It tells you what the seller wants, and how well advised they are. Divide it by the reconstructed SDE to get the implied multiple, then ask whether the business justifies that position in the band. A price implying 4.5× on a business with one dominant customer and a lease expiring next year is not a negotiation about multiples, it is a mispriced listing.
What about EBITDA?
EBITDA is the right basis once a business is manager-run and large enough that the owner\u2019s compensation is a real operating cost rather than a discretionary draw — conventionally above roughly $1M of earnings. Below that, adding the owner\u2019s pay back and using SDE describes what a new owner-operator actually receives. Using the wrong basis with the right multiple produces a badly wrong price.
Will my lender use the same number?
No. An SBA lender reconstructs the earnings independently, discounting add-backs they will not accept, and then sizes the loan to what the cash flow services at their required coverage ratio. Their number governs what you can borrow regardless of what you and the seller agree the business is worth.
Does New York change the valuation itself?
Not the arithmetic, but several New York factors change the earnings the arithmetic runs on: the Commercial Rent Tax below 96th Street in Manhattan, occupancy costs that vary enormously across the state, wage levels that differ by county, and licences that may not transfer at all. Those change SDE, and SDE is what gets multiplied.
Sources cited on this page
Every mutable number on this page — program caps, tax rules, thresholds, filing deadlines — traces to one of these primary sources. Rules change; check the source before you act on the number.
- 1 BizBuySell. BizBuySell Insight Report, Q2 2026. https://www.bizbuysell.com/insight-report/
- 2 U.S. Small Business Administration. Buy an existing business or franchise. https://www.sba.gov/business-guide/plan-your-business/buy-existing-business-or-franchise
Educational only — not legal, tax, lending, or investment advice. Confirm specific rules, rates, and forms with the relevant New York State agency, attorney, CPA, lender, or insurer before acting. See the editorial policy and methodology for how sourcing and review work.