When a smaller business is valued, the starting point is usually seller's discretionary earnings: the profit, plus what the business pays one owner, plus a handful of adjustments. It is the right number for most businesses this size, because most buyers plan to run the company themselves. But it carries an assumption owners rarely stop to check. It assumes one person can step into your role and do what you do. If your role is really three jobs, the buyer is going to notice, and the number is going to change.
1. Buyers count the jobs, not the title
A buyer does not read "owner" on the org chart and move on. They ask what you do in a typical week. In a lot of the businesses I sit down with, the owner is the top salesperson, the estimator, the one who fixes the machine nobody else understands, and the one who signs every check. A buyer who can cover one of those jobs has to hire for the rest. Every hire comes out of the earnings they are paying for.
2. What that does to the number
Take a hypothetical business showing $400,000 in SDE. If a buyer concludes they will need a manager at $70,000 a year to cover what the owner does beyond one full-time role, the earnings they are really buying look closer to $330,000. At the same multiple, that is a meaningfully lower price. The buyer's lender will run the same math. It happens whether the owner does the arithmetic or not, so it is better to do it first.
3. The multiple can move too
The jobs a buyer can hire for are a cost. The jobs nobody can easily replace are a risk, and risk shows up in the multiple. If the customer relationships, the pricing knowledge or the technical skill live mostly in your head, a buyer has to wonder how much of the business leaves when you do. That is one reason two businesses with similar SDE can sell at different multiples. One has an owner who runs it. The other has an owner who is it.
4. "I'll just hire someone" is harder than it sounds
Here in the Triangle, finding a capable operations manager or an experienced estimator has taken longer and cost more over the past few years, as growth has pulled in employers competing for the same people. Buyers know that. A plan that rests on hiring the owner's replacement after closing carries less weight when everyone is trying to hire the same few people. A business that already has that person on staff, trained and staying, is worth more for that reason alone.
5. Shrinking your role before you sell
The answer is not to work less overnight. It is to move one job at a time onto someone else, and let each change settle long enough to show it works. Train a second estimator. Hand the key accounts to a salesperson and stay in the background on the calls. Write down how the equipment gets fixed and who to call when it breaks. Then watch how the business does. A year of results without you doing everything is evidence a buyer can rely on. A promise that it would work is not.
The takeaway
Your SDE assumes a buyer can do your job. If your job is really three jobs, the buyer will price the difference, once in the earnings and sometimes again in the multiple. The more of those jobs someone else already does well, the closer the offer lands to the number you had in mind.
