BUSINESS VALUATION UNITED STATES

SDE (Seller's Discretionary Earnings) is used for owner-operated businesses in the United States, typically under $5 million in revenue. It adds back owner salary, benefits, and discretionary expenses to net income. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is used for larger businesses with management teams and is the standard metric for private equity and institutional buyers. The appropriate method depends on your business size, structure, and likely buyer profile.

Location significantly impacts business valuations across the United States. Coastal regions (Pacific Northwest, Northeast) typically command 32% higher startup valuations than national averages. However, non-coastal regions offer buyers 1.5-2.5x more equity per dollar invested. State tax environments matter too — selling in Texas or Florida versus California can significantly affect after-tax proceeds. We factor regional dynamics into every valuation we perform.

Our valuations are specifically designed to meet SBA 7(a) lender requirements. We use recognized methodologies, support conclusions with comparable U.S. transaction data, and document our analysis thoroughly. While lenders conduct their own reviews, our reports provide the foundation they need to approve acquisition financing. Businesses with professional, defensible valuations close faster because lender approval happens smoothly.

Business valuations are typically valid for 6-12 months, assuming no significant changes to the business or market conditions. Economic shifts, interest rate changes, and industry developments can affect multiples over time. We recommend updating your valuation annually if you're planning an exit within 2-3 years, and immediately before going to market if more than 6 months have passed since your last appraisal.

For a comprehensive U.S. business valuation, we typically need 3-5 years of federal tax returns, profit and loss statements, balance sheets, and a current accounts receivable/payable aging if applicable. We also request information about customer concentration, employee structure, lease agreements, and any owner-related expenses that would be adjusted in a sale. More documentation enables more accurate valuation.

Qualified Small Business Stock (QSBS) under Section 1202 allows eligible C corporation shareholders to exclude up to $15 million in federal capital gains (increased from $10 million by the 2025 OBBBA). This can effectively make your sale tax-free at the federal level. During valuation, we identify whether QSBS treatment applies and factor this into transaction planning. Note that shareholders must hold stock for at least 3 years (increased from 5 years) to qualify.

American buyers pay premium multiples for specific characteristics: recurring revenue and subscription models, diversified customer bases (no customer above 10-15% of revenue), documented systems and processes, management teams that can operate without the owner, growth trajectories above industry averages, and defensible competitive advantages. Our valuation report identifies specific actions to improve these factors before you go to market.

U.S. business valuations respond to macroeconomic factors including interest rates, consumer confidence, and industry-specific trends. The U.S. Chamber Small Business Index hit a record 72.0 in Q3 2025, indicating strong confidence. However, 75% of small firms cite rising costs as their top challenge. We factor current economic conditions into every valuation, adjusting multiples based on financing availability, buyer demand, and industry outlook.

A professional business valuation in the United States typically takes 2-4 weeks from document submission to report delivery. The timeline depends on document availability, business complexity, and the depth of comparable transaction research required. We can expedite valuations when needed, though rush turnarounds may affect the depth of analysis. We recommend starting the valuation process 6-12 months before your target sale date.