Business Brokers of America: Utah’s Seasoned Business Brokers

How To Determine the Value of a Small Business

Salt Lake City, United States – April 3, 2026 / Business Brokers of America /

Selling or buying a business without knowing its true value is costly. Whether it’s a buyer’s first acquisition or an owner planning to exit, understanding market value is crucial. Business Brokers of America has guided many Utah clients through successful transactions.

For those wondering how to value a small business, proven industry methods provide clarity. Owners looking to increase business value before selling should know what buyers and lenders focus on during due diligence. Business Brokers of America explains small business valuation methods and the key factors affecting price.

How To Determine the Value of a Small Business

For most small businesses under $5 million in revenue, the starting point is the SDE, representing the total benefit a full-time owner receives annually. Learning how to value a small business begins here.

The seller’s discretionary earnings calculation starts with pre-tax net income, then adds back:

Owner’s salary and payroll taxes
Interest, depreciation, and amortisation
Personal perks run through the business
One-time or non-recurring expenses

This calculation shows a buyer’s expected earnings. Documenting each add-back is necessary, as buyers and lenders verify records.

Applying the Business Valuation Formula

After establishing SDE, an earnings multiple determines value, which is the core of the business valuation formula. In Utah, multiples range from 2.0 to 4.0. Understanding how to value a business helps ensure the multiple accurately reflects its true potential.

Factors influencing the multiple include owner dependence, recurring revenue, clean financials, years in business, and local market demand. Businesses in Salt Lake City and Utah County often land higher due to strong buyer activity.

Small Business Valuation Methods Used in Utah

Understanding the valuation process helps owners and buyers understand why multiple approaches are important. Different enterprises require different business valuation methods. Combining methods produces a defensible number.

Business appraisal methods include:

Discounted cash flow: Projects 3 to 5 years of earnings and adjusts to present value using a risk-based rate, making it suitable for predictable revenue
Asset-based valuation: Calculates the fair market value of tangible assets minus liabilities, making it ideal for asset-heavy businesses
Market comparison approach: Examines recent sales of similar businesses, and is a reliable business appraisal method

What Moves the Number Up or Down for Utah Business Owners

Businesses where the owner does not run daily operations attract stronger offers. Recurring revenue from agreements, memberships, or contracts adds stability. Understanding how to value a small business helps owners see how these factors affect price.

Clean, well-documented financials reduce due diligence friction, while heavy owner dependence or inconsistent records lower the multiple. Business Brokers of America notes that the state’s favorable business climate and strong SBA lending environment attract buyers. Businesses qualifying for SBA financing see stronger demand.

How Business Brokers in Utah Support Buyers and Sellers

Local expertise affects deal speed and price. Business brokers in Utah evaluate financials, prepare valuations, qualify buyers, negotiate terms, and guide due diligence. Their involvement helps sellers avoid leaving money on the table.

About Business Brokers of America

For anyone wondering how to value a small business in Utah, the best starting point is a conversation with a local expert. Business Brokers of America provides valuations across the Wasatch Front and beyond.

Whether clients plan to list soon or want to know the current value, Business Brokers of America offers professional guidance to move forward confidently. Contact them at (801) 935-8919.