What a buyer would discount your business for, and one task to hand off first.

I visited an 85 year old accountant I know who sold his business last year. The sale didn't go well.

He loves the work, to still be doing it at his age, but he realized he should scale back a bit.

He'd thought he was scaling back to 25 returns; but the team that bought his firm has been largely absent. He has worked with many of his clients for 3 generations and his loyalty and pride meant when the new firm didn't do the work, he did over 300 returns himself. He delivered, but he's been in the hospital since.

Business consolidation is not one story, but at least three.

• If you are buying, the question is what a competitor is worth and whether now is the moment.

• If you are selling, the question is whether your business clears the bar buyers are setting.

• If you have already sold, the question is whether the handover is going the way the agreement said it would.

This week's report looks at selling your business.

The number buyers use

SDE, seller's discretionary earnings. Net profit, plus your salary and benefits, plus one-time and personal expenses, plus interest, taxes, depreciation and amortization.

It is the number a broker will use for an owner-operated business.

Above roughly one to two million in earnings, or where someone else already runs the day to day, buyers switch to EBITDA and the multiples go up. If EBITDA applies see Note 2.

Looking at public SDE data for main street owner-operated businesses, only available quarterly.

The series runs from 2021. The first five quarters are used to build the rolling average and the derivative chain, so the readable window starts in Q2 of 2022. Seventeen quarters. All SDE figures below the Position section are three-quarter rolling averages, and the derivative math is mine, computed on the published series.

Position

2,117 small businesses changed hands in the second quarter of 2026.
Median sale price $349,250. Median SDE $155,921. Median revenue $692,087.
The SDE multiple was 2.65. The revenue multiple was 0.71.

Velocity

Number of sales transactions fell 10 percent year over year, after falling 1 percent the quarter before.
Smoothed SDE went the other way. Up 1.2 percent on the quarter. Up 3 percent year over year.
The multiple rose with it, 2.59 a year ago to 2.65 now.

Acceleration

The sales transactions decline steepened. Down 1 percent in the first quarter, down 10 percent in the second.  

The earnings stayed near constant.
Fewer deals closing, at higher multiples, on businesses earning only slightly more than a year ago.
Buyers did not leave. They are being choosier.

Jerk

Seventeen quarters is enough data to analyze jerk reliably.  It is just $203 on an SDE of $162,000, that is effectively zero.
No inflection in the earnings of businesses that sold in four years.
The change in this market is not in the businesses. It is in the buyers’ behavior.

What the brokers said

At the end of last year, 72 percent of brokers, per Note 3, expected more owners coming to market. 49 percent said Baby Boomers already make up the majority of their listings. 80 percent forecast higher deal volume over the following six months.

Volume fell 10 percent. So it seems the sellers are arriving. The deals are not.

Surveys tell you what people expect. Transactions tell you what they did. When those two disagree, the transactions are the data.

Your five-minute practice this week

Reminder, you may wish to keep your financial data outside of your LLM. Rounded numbers work fine.

If SDE applies:

Act as a buyer evaluating my business. I will not share financials. First, ask me for a three sentence description of what my business does and who runs what.
Then list every task in my business that only I can do.
For each one, tell me what you would discount your offer for it, and why.
Then tell me which single task on the list, if I handed it to someone else in the next 90 days, would move my multiple most.

If EBITDA applies:

Act as a buyer evaluating my business. I will not share financials. First, ask me for a three sentence description of what my business does and how it is managed.
Buyers at my size discount for management depth below the owner, customer concentration, and project revenue versus contracted revenue.
Ask me one question about each. Then tell me which of the three you would discount hardest, what that discount looks like against a 4x median, and what would remove it.

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Best wishes,

Rose

 Notes

1.       https://www.bizbuysell.com/news/insight-interactive/  has the US numbers by market sector and census metro area. I am looking at national levels where there is more data available. If you want to look for your specific niche locally, that data is available but may be hard to read down to Jerk levels. https://public.tableau.com/shared/Q95JH7N2S?:display_count=n&:origin=viz_share_link is the specific link.  Baltimore Towson, MD multiples are lower than national averages.

 2.       EBITDA multiples for businesses above roughly $2M in value are published quarterly in the IBBA and M&A Source Market Pulse report. https://www.ibba.org/resource-center/industry-research/ The Q2 2026 medians were 4.0x EBITDA for deals between $2M and $5M and 5.8x for $5M to $50M.

3.      Broker sentiment figures are from the BizBuySell 2025 Fourth Quarter Insight Report, January 2026. https://www.bizbuysell.com/news/bizbuysell-2025-fourth-quarter-insight-report/

4.   Photo by Getty Images on Unsplash