Let me tell you something I’ve learned the hard way over the years. Whether you’re squatting 500 pounds or running a business, the biggest wins come when you stop paying someone else to do the work you can do yourself.
I’ve watched plenty of gym rats hand their entire training program to a coach who barely knows their body. Same thing happens with business owners. They list their company and fork over 10 percent to a broker before they even know what the place is worth. That never sat right with me.
Here’s the good news. You can price your own business. The tool is called the SDE formula, and once you get it, you’ll wonder why you ever considered outsourcing it. Let’s break it down like a solid training split.
What Is SDE and Why Should You Care?
SDE stands for Seller’s Discretionary Earnings. Think of it as the true earning power of your business. It’s the number a buyer actually cares about because it shows what they’d pocket while running the place themselves.
The formula looks like this:
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Start with your net profit
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Add back your own salary or owner’s draw
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Add back one-time expenses (lawsuits, equipment failures, that office renovation you regret)
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Add back non-cash expenses like depreciation and amortization
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Add back personal expenses the business covered (your truck, your phone, your gym membership)
Boom. That’s your SDE. It’s honest. It’s clean. And it’s the foundation for everything else.
How to Apply the SDE Multiple
Here’s where it gets interesting. Buyers don’t pay a flat rate for SDE. They apply a multiple, and that multiple swings based on your industry, your size, and how much they trust that your numbers will hold up.
Small businesses typically sell for 2x to 4x SDE. Stronger operations with clean books and recurring revenue can push higher. I’ve seen guys with rock solid systems get 5x or more. Meanwhile, a business held together with duct tape and the owner’s sheer willpower? Good luck getting 2x.
Quick reality check before you get stars in your eyes:
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Buyers will dig through your books like a judge at a physique show
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Messy financials kill deals faster than a blown knee
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Recurring revenue bumps your multiple up
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Customer concentration drags it down
Pricing Your Business Step by Step
Run the numbers in this order and don’t skip steps:
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Calculate your SDE using the formula above
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Research comparable sales in your industry (talk to other owners, check listings)
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Pick a realistic multiple (start conservative, you can always negotiate up)
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Multiply SDE by your multiple to get your asking price
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Sanity check the result against your assets, debts, and market conditions
Sounds simple, right? It is, mostly. The tricky part is being brutally honest with yourself. I’ve seen plenty of guys in the gym who think they’re benching more than they are. Same trap applies here. Inflate your SDE and buyers will smell it in the first meeting.
The Stuff Nobody Tells You
Selling without a broker means you handle the messy parts yourself. That includes:
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Drafting a solid purchase agreement (hire a lawyer for this one, seriously)
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Vetting buyers so you don’t waste weeks on tire kickers
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Keeping your employees calm during the transition
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Staying organized when documents start flying back and forth
It’s more work. I won’t pretend otherwise. But you keep the commission, you control the narrative, and you learn your business inside and out during the process. That knowledge sticks with you.
One last thing. Get your financials clean months before you list. Clean books raise your multiple and speed up the sale. Messy books cost you money and time. Trust me on this one.
Go run your numbers. Then run them again. Discipline beats guesswork every single time.