How to Value a Small Business in Canada (Without the Fluff)

The Quick Math (But Not the Whole Story)
Most small businesses are valued at 2–3× their Seller’s Discretionary Earnings (SDE). That’s your profit + your salary + a few legit add-backs. Sounds simple, right?

It’s not.

What Buyers Actually Look At:

• Consistency of earnings — Spikes and dips raise red flags

• Owner dependence — Does the business run without you?

• Customer concentration — If 40% of your revenue is one client, that’s risky

• Clean books — No one wants a mystery box

What Increases Value:

• Recurring revenue

• Documented systems (yep, like SOPs)

• Management team in place

• Good vendor/customer contracts

What Kills Value Fast:

• Unreported cash

• Family on payroll for no reason

• No digital trail (no CRM, no data, no systems)

• Emotional price expectations

Takeaway:
Valuation isn’t magic. It’s logic. Know what drives value and start building it before you think about selling.