How Business Brokers in Illinois Value a Company: SDE, EBITDA, and Multiples Explained Simply
Business brokers in Illinois value most owner-operated companies by multiplying adjusted earnings by a market multiple. Businesses selling for under about $2 million are usually priced on Seller's Discretionary Earnings (SDE), and larger ones on EBITDA, with the multiple moving according to size, risk, and how much the business depends on you.
Business brokers in Illinois value a company by recasting its financials to find true owner earnings, then applying a market multiple drawn from comparable sales. Smaller businesses are priced on Seller's Discretionary Earnings, typically at 2x to 3x. Larger companies are priced on EBITDA, typically at 4x to 5.5x, based on 2025 IBBA data.
Quick Answer: Your business is worth its adjusted earnings times a multiple. Get the earnings right first, because every documented dollar of add-back is worth two or three dollars at the closing table.
Key Takeaways
- SDE counts everything one working owner takes from the business. EBITDA replaces the owner's pay with the cost of a hired manager.
- Under the IBBA's Market Pulse convention, deals under $2 million are priced on SDE and deals from $2 million to $50 million on EBITDA.
- Small businesses sold through BizBuySell in 2025 averaged 2.61 times cash flow, and multiples rise with deal size.
- Add-backs you can document raise your value. Add-backs you can't document disappear, along with the price they would have supported.
Start With the Earnings, Not the Asking Price
$264,000. That is what a hypothetical Naperville commercial cleaning company actually produces for its owner each year, even though its tax return reports $95,000 in net profit.
The difference between those two figures decides most of what a buyer will pay. It is also where many owners undervalue their own businesses without realizing it.
We'll finish valuing that company further down. If you'd rather see your own numbers than a made-up company's, FCBB Naperville offers a complimentary business valuation built on recent comparable sales.
What Does It Mean When a Broker Values a Business?
To a broker, a valuation is an estimate of what a qualified buyer is likely to pay, grounded in recent comparable sales. It isn't an appraisal for tax or estate purposes.
Brokers in Illinois typically use a market approach: normalize the earnings, choose the right earnings measure, and apply a multiple supported by closed-deal data.
Valuation professionals use three broad approaches. The market approach compares your business with similar ones that actually sold, and it is the one most Main Street buyers and lenders recognize.
The income approach projects future cash flow and discounts it back to today, which suits larger companies with predictable growth. The asset approach adds up what the business owns, and it usually sets a floor for companies that aren't profitable.
For an owner-operated business in DuPage or Will County with steady profits, the market approach does most of the work. Two inputs matter more than anything else: the earnings figure and the multiple.
What Is SDE, and How Do You Calculate It?
Seller's Discretionary Earnings is the total financial benefit one full-time owner takes from the business in a year. Start with pre-tax net profit, then add back the owner's salary and benefits, interest, depreciation and amortization, and one-time or personal expenses run through the company.
Each add-back needs documentation a buyer's lender will accept.
Here is the cleaning company from the opening. Every figure below is illustrative, chosen to show the mechanics.
| Line item | Amount |
|---|---|
| Pre-tax net profit (per tax return) | $95,000 |
| Add back: owner's salary | $110,000 |
| Add back: owner's health insurance | $14,000 |
| Add back: depreciation | $22,000 |
| Add back: interest on equipment loan | $8,000 |
| Add back: one-time legal fee (lease dispute) | $6,000 |
| Add back: owner's personal vehicle expensed through the business | $9,000 |
| Seller's Discretionary Earnings | $264,000 |
The add-back list is where buyers, and especially their lenders, push hardest. A one-time legal fee with an invoice usually survives, while a family phone plan or a conference trip that was mostly a vacation often doesn't.
Owners tend to find this the most frustrating part of the process. Years of running personal costs through the business made sense for taxes, and now each one has to be proven to count.
What Is EBITDA, and When Do Brokers Use It Instead?
EBITDA is earnings before interest, taxes, depreciation and amortization, with the owner's pay reset to what a hired manager would cost. Brokers switch to EBITDA for larger companies because those buyers assume they will hire management.
The IBBA's Market Pulse survey prices deals under $2 million on SDE and $2 million to $50 million on EBITDA.
Run the same cleaning company through EBITDA. Assume a qualified general manager would cost $90,000 a year in salary and benefits, again an illustrative figure.
$264,000 in SDE minus $90,000 for the manager leaves $174,000 in EBITDA. The earnings figure shrinks, which is exactly why EBITDA multiples look larger than SDE multiples.
| Factor | SDE | EBITDA |
|---|---|---|
| What it assumes | One owner works in the business full time | A paid manager runs the business |
| Owner's pay | Added back in full | Replaced with market-rate management cost |
| Typical deal size (IBBA convention) | Under $2 million | $2 million to $50 million |
| Typical buyer | Individual owner-operator, often SBA-financed | Experienced operators, strategic acquirers, private equity |
| Q4 2025 average multiple (IBBA) | About 2.0x to 3.1x | About 4.1x to 5.5x |
Applying an SDE multiple to EBITDA, or the reverse, is one of the most common reasons two valuations of the same business disagree. Always ask which earnings figure a multiple sits on.
What Multiples Are Small Businesses Selling For Right Now?
In 2025, small businesses sold through BizBuySell averaged 2.61 times cash flow, at a median sale price of $350,000. IBBA's Q4 2025 Market Pulse showed multiples rising with size: about 2x SDE under $500,000, roughly 3x for $500,000 to $2 million, then 4.1x and 5.5x EBITDA for larger deals.
| Deal size (enterprise value) | Earnings basis | Q4 2025 average multiple |
|---|---|---|
| Under $500,000 | SDE | 2.0x |
| $500,000 to $1 million | SDE | 3.0x |
| $1 million to $2 million | SDE | 3.1x |
| $2 million to $5 million | EBITDA | 4.1x |
| $5 million to $50 million | EBITDA | 5.5x |
Source: IBBA and M&A Source Market Pulse, Q4 2025 Highlights.
The survey reflects averages reported by business brokers and M&A advisors across industries. A specific business can land well above or below its tier.
BizBuySell's 2025 year in review also reported an average revenue multiple of 0.69x. Revenue multiples are tempting because revenue is easy to find, but two companies with the same sales and different margins carry very different values.
So What Is the Cleaning Company Worth?
With $264,000 in SDE, our hypothetical company falls in the $500,000 to $1 million tier, where IBBA's Q4 2025 average was about 3.0x. That points to a value near $790,000.
A reasonable range runs from roughly $660,000 at 2.5x to $870,000 at 3.3x, depending on risk factors.
Remember the $9,000 vehicle add-back from the table? At a 3.0x multiple, that single line is worth about $27,000 of sale price.
Lose the documentation, and the $27,000 goes with it. This is an illustration rather than a valuation, and a real opinion of value starts with three years of financials and the risk factors below.
What Makes a Multiple Go Up or Down?
Multiples rise when a buyer sees lower risk and easier financing, and fall when the business depends on the owner, a few customers, or numbers that don't reconcile. Clean three-year financials, recurring revenue, a trained team, a transferable lease, and steady growth tend to push a business toward the top of its range.
- Owner dependence. If customers ask for you by name and only you can quote a job, a buyer prices in the risk that revenue will leave when you do.
- Customer concentration. One client producing a large share of revenue narrows the buyer pool and pulls the multiple down.
- Financial clarity. Reconciling tax returns, profit-and-loss statements, and bank deposits gives a lender confidence, and financeable deals attract more buyers.
- Revenue trend. Three years of steady or rising earnings support the top of the range, while a declining year invites a harder negotiation.
- Transferable assets. A lease with years remaining, trained staff, and written procedures all carry value to the next owner.
Financing affects the multiple more than most owners expect. Since June 1, 2025, the SBA's SOP 50 10 8 requires at least a 10% equity injection for a complete change of ownership, and lenders underwrite the purchase price against verifiable cash flow.
Naperville owners sometimes ask whether a strong suburb and a busy downtown push the multiple up. Location helps, mostly through the lease and the local labor pool, but it rarely outweighs clean books.
Whether multiples keep climbing through 2027 is a question nobody can answer honestly yet. BizBuySell's average cash flow multiple rose about 1% in 2025, and that is as far as the evidence goes.
Do Business Brokers in Illinois Have to Be Registered?
Yes. Under the Illinois Business Brokers Act of 1995, anyone engaged in business brokering in Illinois must register with the Secretary of State's Securities Department and renew that registration annually.
The rules under the Act also require brokers to give clients a disclosure statement and time to review the engagement contract, including with an attorney, before signing.
The Illinois Administrative Code, Part 140 sets out those registration and disclosure rules. When you interview brokers, ask for their registration and ask how they will arrive at a value for your business.
A broker who quotes a number before seeing your financials is guessing. How a broker values a business also shapes how fast it sells, a point covered in our comparison of a local Illinois broker and a national online marketplace.
First Choice Business Brokers has specialized in business sales since 1994 and is a member of the International Business Brokers Association. Illinois business brokers at FCBB Naperville work with owners across Chicago and the western suburbs.
Know Your Number Before a Buyer Does
A valuation built on documented earnings and a defensible multiple protects you in negotiation and keeps the sale on schedule. It also answers the question many owners carry for years: what is everything I've built actually worth?
FCBB Naperville prepares that answer confidentially, starting with a complimentary valuation.
Schedule a Free Consultation Today! Or call (630) 447-8626.
Frequently Asked Questions
How much is my business worth if it makes $200,000 a year?
SDE counts everything one working owner takes home, including salary and perks. EBITDA replaces the owner's pay with the cost of a hired manager. Brokers generally price businesses under about $2 million on SDE and larger companies on EBITDA, which is why EBITDA multiples look higher.
Do business brokers in Illinois charge for a valuation?
Practices vary by firm. FCBB Naperville offers a complimentary business valuation to owners considering a sale, based on recent comparable transactions. A certified appraisal for estate, tax, or litigation purposes is a separate service from a broker's opinion of value.
Can I value my business using a revenue multiple?
You can, but only as a rough check. BizBuySell reported an average revenue multiple of 0.69x for small businesses sold in 2025. Two companies with identical revenue can have very different profits, so buyers and lenders rely on earnings-based multiples instead.
Which add-backs will a buyer accept?
Buyers generally accept the owner's salary and benefits, interest, depreciation, amortization, and clearly one-time expenses supported by invoices. Personal expenses run through the business count only when documented. Anything a lender can't verify is usually removed, along with the value it would have added.
About the Author
Domonic Wilkerson, Broker, First Choice Business Brokers Naperville
Domonic holds a B.S. from Purdue University and an MBA from Indiana University's Kelley School of Business. His background spans business development, manufacturing, supply chain, and strategic planning.
50 S Main Street, Suite 200, Naperville, IL 60540
FCBB agents are licensed professionals specializing in business sales. We do not provide legal or tax advice. Consult your own advisors.
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