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Business Valuation in Seattle: How Buyers Get to a Price

There is no single correct value for a private company. There is a range, and where you land in it depends on how buyers read your earnings and your risk.

Seattle Business Brokers Desk explains the math buyers use before you hear their offers.

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Accountant and company owner comparing two printed financial statements side by side at a desk with a calculator, Seattle office with rain on the window

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See what buyers would pay for your company

Step 1 of 3

We refer sellers to a brokerage partner, which may pay us a fee. You pay nothing. How it works

Step One: Pick the Right Earnings Figure

Buyers start with profit, then adjust it. Which version they use depends mostly on size.

  • SDE (seller's discretionary earnings) is used for most companies under about $2 million in sales or where the owner works full time. It adds the owner's salary and perks back to profit.
  • EBITDA is used for larger companies with a management team. It assumes a paid manager runs the place, so a market salary for that role stays as an expense.

Using the wrong one can swing your number by a wide margin, in either direction.

Step Two: Add Backs That Hold Up

Add backs are expenses a new owner wouldn't have. Good ones are documented and easy to verify. Common examples:

  • A family member on payroll who doesn't work in the business
  • One time legal bills, a lawsuit settlement or a move
  • Personal vehicle, phone or travel run through the company
  • Above market rent paid to an owner who also owns the building

Buyers discount add backs they can't verify. A schedule with receipts attached is worth more than a long list without them.

Step Three: The Multiple

The adjusted earnings get multiplied by a figure that reflects risk and growth. Smaller, owner dependent companies sell for lower multiples. Larger ones with recurring revenue and a management team sell for higher ones.

Your industry also matters. A physical therapy clinic with steady referral sources reads very differently from a project based contractor.

What Pulls a Seattle Price Down

  • One customer or contract carrying a large share of revenue
  • Key staff who might leave with the owner
  • Equipment that is near the end of its life
  • A short lease in a neighborhood where rents have climbed
  • State tax accounts with gaps, which buyers treat as hidden debt

Price Versus What You Keep

Two offers with the same price can leave you with very different amounts. Seller financing, an earnout, the asset allocation and Washington's capital gains tax all affect your net.

Our guide to the capital gains tax on a business sale covers the deduction many family owned companies qualify for.

Asset Sale or Stock Sale

Most companies under a few million dollars in value sell as asset sales. The buyer buys the equipment, customer relationships and goodwill, and leaves the old company and its history behind.

Larger companies, and companies with licenses or contracts that are hard to transfer, more often sell as stock sales. The structure affects your taxes and the buyer's risk, so it affects price too.

Getting Your Own Range

A broker can give you a realistic range after a short conversation and a look at your recent numbers. Start with the price check form or call (206) 555-0171.

Call (206) 555-0171